Debt Consolidation: How to Make It Work For You
When you have a number of debts to pay off, it's not easy to try and juggle them. If you have different payments to take care of at different times of the month and various contracts that you have to follow, it can take up time and cause a lot of stress. If you want to make things simpler, you might decide to consolidate your debts instead. There are a number of ways you might do this, including with personal loans, special debt consolidation loans or even with a credit card. If you want to consolidate your debts, take a look at these tips.
Benefits of Debt Consolidation
You might be wondering why you should bother consolidating your debts. Debt consolidation can benefit you if you have a number of debts that you want to deal with but you're finding it difficult to manage them. When you consolidate your debts, you can turn them into a single payment so that you only have to worry about paying off one debt instead of several of them. It can help you to get organized and you might be able to save money by only having to consider interest on one debt. You can reduce stress by only having to consider one term, payment date and payment amount.
When Not to Use Debt Consolidation
Debt consolidation doesn't always make sense for people dealing with a number of debts. For example, if consolidating your debts means that new fees and charges will wipe out your savings, it's not a good idea. If you will be paying more in interest once you consolidate your loans, it doesn't make financial sense to do it. If you're going to consolidate your debts, it's best to be able to roll all debts into one payment, so it may not make sense if you will still have other outstanding debts. And, of course, it doesn't make sense if you will end up paying more or be unable to meet the payments.
Consolidate Your Debts with a Credit Card
If you have decided that consolidating your debts is the right move for you, using a credit card can be one of the options you have. You might choose this possibility if you have other credit card debt on several cards that you want to transfer to a single card. A balance transfer can allow you to start again with a new card, and you can often benefit from interest free payments for a number of months too. You could also use a credit card to pay off other debts, especially if paying them in full earlier than scheduled could save you money. Choosing a 0% interest credit card can help you save money for anywhere from six months to a couple of years.
Consolidate Your Debts with a Loan
Another option for consolidating your debts is to take out a loan. You can consider loans designed specifically for debt consolidation or personal loans that you can use for anything. There are both secured and unsecured loans to consider, and your choice will likely depend on whether you have any assets to secure a loan against, as well as if you're prepared to risk them. You can consider guarantor loans if you're looking for a way to get approval for a loan but you're worried you're not a particularly good candidate. A guarantor can co-sign your loan for you to provide security to the lender. Some loans might be designed specifically for debt consolidation too.
Planning to Pay Off Your Debt
If you want to consolidate your debts, you need to make sure you will be able to pay off your debt. It obviously only makes sense to consolidate your debts if you will be paying less overall than you would if you paid each of your debts separately. But even if you roll everything into one payment, you should still consider how you're going to make sure you will be able to follow the payment schedule. It's a good idea to work out a budget and prioritize paying off your debt over other expenses. If you make sure that the payment automatically leaves your bank account whenever it's due, you won't have to worry about it.
Alternative Ways to Manage Debt
If you're considering consolidating your loans, it's also important to think about other ways that you might manage your debt. There are other options that might be right for you, especially if debt consolidation might not be the best choice. If you want to manage your debts, you can consider debt counseling, which will allow you to get help and advice from a professional. They can help you to find the best way to make your debts more manageable, whether it's through consolidation or another method.
Avoiding More Debt
Whether or not you choose to consolidate your debts, avoiding taking on any more debt is a good idea. Firstly, you should get rid of credit cards to stop yourself spending any more money with them. You can definitely benefit from creating a budget that will help you to make the most of your money and avoid having to take on more debt. It's important to know how to control your spending and when you don't need to buy something. While some people end up with debt out of necessity, unnecessary overspending can get you into trouble too.
Deciding If Debt Consolidation Is Right For You
If you're considering debt consolidation, you should make sure it's the right choice for you first. Try starting by filling out a budget sheet that lists your income and outgoings so that you can work out how payments for your debts currently fit into your budget and how that could change if you consolidate your debts. Take a look at your credit score too, as this will affect your options when you're considering consolidating your debts.
Debt consolidation could work for you if you want to make your debts more manageable. However, it's not always the right choice, so think about it carefully.
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