Seven Steps To A Healthier Bank Balance With
A Debt Consolidation Loan
by: Gary Tallon
If your debts are getting you down then you
can’t afford to ignore the option of taking out a debt consolidation
loan to help you sort out your financial situation. In this case scenario
you basically take out a personal loan that is big enough to pay off all
of your existing debts. You then have one loan to repay at better interest
rates and – most importantly – you have a specific target date
when all of your debts will be repaid. So, if you think that this could be
the ideal solution for you, then read through our Seven Step guide for further
information.
Step One – Be honest about your debts
First of all you need to look at your financial
situation and see how bad it really is. If you find that you are currently
only making minimum repayments on the money you owe because you can’t
afford to pay off more then a debt consolidation loan may be your only answer
before things get worse.
Step Two – Look at where your debts come
from
If, like most people with debt problems, you
find that most of the money you owe is on credit and/or charge cards then
you should change your situation as soon as you can. Borrowing money on plastic
is expensive – at the very least – and can make it really hard
to repay the money you owe. If you don’t repay a credit card balance
in full every month then a lump of interest will be added to the money you
already owe so your debts may grow a lot quicker than you can cope with them.
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Step Three – Make the decision to sort yourself
out
It’s not hard to get help to sort out your
finances – no matter how dire you may feel that they are. But you
won’t get anywhere fast unless you yourself are committed to getting
your finances in order. If you’re looking at a debt consolidation loan
as a solution then make sure that you get one that will cover all of your
debts first of all so that you will be working with a clean slate. And, if
you owe a lot on credit cards, then make sure that you get rid of them (or
at least most of them) once you’ve used your consolidation loan to pay
off your balances. You’ll never get out of the debt spiral if you use
a debt consolidation loan to get yourself a clean slate but then just carry
on spending and build up new debts.
Step Four – Decide on the loan that’s
right for you
Your next stage is to work out what kind of
debt consolidation loan will suit you best. You might, for example, simply
opt for a general personal loan or you may prefer a specialist package. If
you’re a home owner you can take out a secured loan to get hold of lower
rates or, if you prefer and/or don’t own a property, then you can take
out an unsecured loan instead.
Step Five – Work out what you can afford
You’ll already have calculated how much
you owe at this stage. Now you need to assess how much you can pay back.
All you need to do here is to work out a simple monthly budget planner. To
do this write down your salary/incomings (after tax) and then take away your
outstanding financial commitments. These shouldn’t include the existing
debts that you want to get rid of but should include other costs such as
mortgage/rent, council tax, bills, food and living/entertainment expenses.
Basically, when you’ve worked this all out you’ll have an idea
of how much disposable income you have left to spend on a consolidation loan.
You may well have to tighten your belt here to have enough left to start
with but it’s better to economise now than to let debt take over your
life.
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Step Six – Find the cheapest option
It’s vital to make sure that you get the
best deal you can for a debt consolidation loan from the point of view of
interest rates. This means that your monthly repayments will be lower and
you’ll pay back less overall in interest. So, don’t clutch at the
first loan you come across but do some ground work first. There are loads
of sites on the Internet that can help you find and compare loan rates for
this kind of loan. Some can even guide you through the application and acceptance
process.
Step Seven - Don’t take your foot off the
pedal till you get there
Finally, you need to keep your eye on the ball
after you’ve sorted your situation out. Debt consolidation loans really
can take the pressure off your finances and it’s easy to forget how
stressful your financial situation once was when you’ve found this solution.
You’ll know, for example, that there is an end in sight and that you
will be on track to repay the money you owe at the end of your loan period.
You may even have more disposable cash to play with every month because repaying
this kind of loan is cheaper than repaying lots of little debts on cards
and so forth. But, don’t be tempted to start spending wildly again.
A lot of consumers sort themselves out with a debt consolidation option only
to mess up their finances again because they don’t sort out their spending
habits. Make sure you don’t join their
ranks! |
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