Consolidating your multiple debts can be useful to you if you consider the factors that will determine which debts to include in it and use the money received in a strategically planned manner. Apart from making the right financial decisions, you will also have to make a few changes in your lifestyle as well to ensure that your debts and finance are both back on the desired track to attain financial freedom.
Finance and money management, whether it is for your personal or for your business, is never easy. It involves a lot of things and factors such as:
- A lot of calculations
- Several factors to consider
- Crafting and following a proper budgeting
- Designing a strategic plan and
- Keeping track of your cash inflow and outflow.
It is only then you will be able to make your debt consolidation loan useful and serve your purpose.
Remember, no matter whether you take out a secured or an unsecured form of a loan, taking out a consolidation loan is literally taking on another debt in addition to your existing ones. It is for this reason it must be used in the proper way.
There is a simple math and concept behind. A consolidation loan is taken out to pay of multiple debts, preferably those that are unproductive, carry high rate of interest and unsecured. This will not reduce the loan amount that you owe to your different creditors in any way. It will just reduce the number of loans by rolling several loans into one.
- For example, assume that you have X number of loans currently of Y amount that are favorable for consolidation. When you take on a debt consolidation loan and use it properly this figure will change to 1. On the other hand, if you cannot make this debt consolidation loan useful and pushed back to the same stressful financial condition you will now have X + 1 number of loan.
- Furthermore, suppose you take out a debt consolidation loan of Z amount and use it successfully then you will only have Z amount to repay in the end as you will have paid the Y amount of loan you previously had. On the flip side, if you cannot make your debt consolidation loan useful, you will now have to pay a total of Y and Z amount, plus the interest on each of these loans.
The long and short of the story is that, if you use your debt consolidation loan successfully you will have a reduced number and amount of debt, or else have added debt burden that will jeopardize your financial, physical as well as mental health affecting your professional and personal life and relationships.
Making your loan useful
To start with you should be well aware of the pros and cons of the debt consolidation loan you wish to take out. Going through different websites looking for info and reading the debt consolidation reviews might help a lot but talking to a reliable and reputable non-profit credit counseling agency will also buy generic viagra provide additional help which is recommended.
- You must know all your financial duties at home
- You must know your income and expenses
- You must have proper resources to make the monthly payments on time and continually
- You must have proper means to meet any other optional expenses and
- You must abstain from taking new loans until your old ones are paid off.
It is only then you will be able to make your loan useful. This may sound very simple but before you even may realize you may end up taking more than one personal loans if you are not strategic with your moves.
To set a proper plan to get rid of your debt make sure that:
- Know the due date of the loan so that you can make prior arrangements of the money to meet the monthly bill. You may set automatic alerts in your mobile phone to know that the due date is close by. This will help you to avoid any chances of missed payments thereby eliminating the chances of more penalties, interests and other fees getting added to the outstanding loan amount making it bigger and higher than you can afford to repay.
- Make sure that you do not include those debts in your consolidation list that have a very low monthly payment or rate of interest, or even those that you can carry on paying till you pay it off in full. Only include the loans that you are finding difficult to manage, those that carry higher rate of interest especially those that are near to close. Also consider unsecured loans only to consolidate such as personal loans and credit card debts outstanding.
- Follow the rate of interest resultant of the consolidated loan and make sure that is lower than all your earlier loans. Make it a point that this difference is substantially great so that you can enjoy the benefits that are inherent in debt consolidation.
To make sure that you follow the plan you will also need to know your responsibilities. You must keep in mind that you will need to repay your existing loans with it and then repay the single debt consolidation loan you have taken out. Taking out a debt consolidation loan will not absolve you from any of your debt obligations.
You must also remember that when you repay all your debts along with the new debt consolidation loan, you will be able to improve your credit score as well which by it should act as a source of motivation for you.
Therefore, if you need, you will also have to make some lifestyle changes to make sure that you are regular with your payments and do not miss out any such as:
- Analyze the reasons for having so many loans and going off the track
- Analyze your budget and curb unnecessary expenses
- Rethink about using your credit
- Work on revising insurance and savings and
- Not shy away from assistance.
This will help you to see yourself that you score is going north.