How does debt consolidation work?
Debt consolidation can be a positive solution if you’re overloaded with high-interest debt. When considering consolidation, it’s important to evaluate your financial status and see how you’ve arrived at your current situation. Sit down with your bills and monthly expenses to determine if your debt load is too much for your income. If you have multiple debt bills to pay every month, and the interest is keeping you from making progress, then debt consolidation could be a sound strategy.
So, what exactly is debt consolidation? It is the process of taking out a loan to combine several outstanding debts or bills into one. If you carry high-interest variable debt like credit cards, you can often get a lower, fixed rate with a personal loan. The rate difference means you’ll save money in the long run or you could pay off your debt sooner. Also, having only one payment can be more convenient than juggling many.
When is a good time to consider debt consolidation? If you are trying to get out of debt and are looking to better manage your bills, this could be your ticket. If you find yourself only making minimum payments each month, the interest accumulates and sucks you deeper into the debt whirlpool. After examining your spending habits and current interest rates, it will become clear if debt consolidation is a good solution to help eliminate debt.
Is it the right option for you? Debt consolidation could be your lifeline. Sit down with your bills and review the interest rates. Then look at how long it would take you to pay off that debt. Determine how much you will need to borrow to pay off your current debt and how long it will take to pay off the loan. If you compare the rate and payoff timeline to that of a personal loan, you can quickly see how much time and money debt consolidation could save you.
Is it a permanent solution? Getting out of debt is great, but staying out of debt is even better. If you choose to consolidate and pay off your debt, it’s important to avoid falling back into old habits. Making a personal debt plan is essential to your future financial health. One of the most important ways to avoid debt is to save. That way, if something unexpected happens, you won’t be forced to use a credit card. Even if it’s just a few dollars every paycheck, it will add up quickly.
Keeping close track of your spending is also important. Avoid impulse purchases and overspending. Before you make any large purchase, really do your research, and consider if the purchase is necessary. Write down your financial goals and keep them in your wallet or purse. That can also help keep you motivated to be debt free.
If you are looking for a debt consolidation loan, Lendmark Financial is here to help. We’re here to talk you through the process and answer all your questions. Learn more about paying off higher-rate debt and begin the debt consolidation process today.