Seven Steps To A Healthier Bank Balance With A Debt Consolidation Loan
Written 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
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.
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.
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
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!
About the author:
This article was written by Gary Tallon, a writer of over ten
years experience in finance and the debt
consolidation loans industry.
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