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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.
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 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!
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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