First you should understand what debt consolidation loans is and what are its advantages and disadvantages. Debt is an expensive thing, and everyone wants to get rid of as soon as they can. You are obliged to pay off an amount of money every month, to a creditor. Debt consolidation is the combination of different unsecured loans, such as payday loans, personal loans and credit cards, into one monthly loan.
It is easy to manage one credit loan, but suddenly you face a financial crisis and your manageable loan turned into an unmanageable debt. It leaves you in shock and distress until you find a solution to it.
If you want to consolidate your debts, research carefully and get the facts and risks associated with it. You should discuss it with a lending company before getting debt consolidation. You can use debt payoff calculator to figure out how many times it will take to pay off all loan.
The ideal consolidated debt is to make your life easy and simplify your financial situation, getting low interest rate.
There is no guaranty that you will get low interest rate, because it totally depends on lenders and your credit score and past payments performance.
The interest rate of consolidated debt may change after some time. The lenders offer introductory promotions, of low interest rates to attract consumers, which expire after some months.
Make calculations how can you manage to pay back a big amount of loan at the end of every month, before changing your small loans into a big one.
You should work on your spending habits and change them to healthy money habits to live a debt free life. You are reconstructing your debt by consolidating it, but you need the reformation of debt.
Here are some budgeting tips to get your debt habit in control and start building wealth.
- The first and most important step is to make a monthly budget and spend according to it, all month. Put all your monthly income and expenditures on a sheet and cut off the unnecessary expenses from the list.
- Refrain from unnecessary shopping. Change your lavish spending habits and daily routine into a positive and simple lifestyle. Keep check and balance on how much you spend and where can you cut off.
- Stop using your credit cards until your financial situation gets under control. Do not tempt with cash back and other rewards on credit card purchases.
- Make a list of all unwanted gifts and items lying useless in your home and sell them on reasonable prices, online to get some cash. Use this cash on paying off your loan.
- If you were doing online shopping in past, you may have given your credit card information for payments. You should delete that information from online stores.
- If you have earned any job increment and bonus during the year, do not use it on any luxury vacation or unneeded item. Use it wisely to pay off your debt.
- Sort out your debts and make a list of them. Pay off the most expensive debt on priority basis.
- Work on paying off more than minimum payments. If you pay more, you will be paying less interest and pay off debt earlier than you think.