How To Consolidate Your Debt

Are you living paycheque to paycheque? Are you tired of paying off high interest rates with no reduction on your principal debt? Are you being harassed by debt collectors, urging you to pay your numerous credit card bills? Do you stay up late at night thinking of how to get out of your financial rut?

If these scenarios sound familiar, then you need to start taking hold of your finances and making the first step in consolidating your debt.

What is debt consolidation?

Debt consolidation is the process of getting one loan with a single monthly payment to pay off all of your debts. The single payment is usually much less than the total of minimum payments on a number of loans or debts.

There are several advantages of debt consolidation. One is better management of your debt as you only need to think of one lender to pay. Your debt consolidator can also negotiate for lower interest rates on your bill.

So, how do you start consolidating your debt? 

1. First, make a list of everything that you owe because you will be getting one loan to pay off all your debts.  
2. Review debt consolidation options that are available on the market. If you are hounded by credit card bills piling up, you can consolidate them into one credit card that can provide you with a high credit limit and reasonable balance transfer rates. You can also secure personal loans to pay off all your existing debts under one lender.
3. Find a lender that can offer you the best solution to your problem. Debt consolidation only makes sense if you can avail of lower interest rates than what you currently have. Make sure that you research on possible lenders and their offerings so that you can maximize the debt consolidation process.
4. Sort your debts based on interest rates. Make a list of those which you need to pay off first because of higher interest rates. In this way, you get them out off your list as soon as you can and proceed in paying off all the other smaller debts.
5. Pay off your loans as fast as possible. Credit and time are not your usual best of friends. When you withhold payment over time, your interest rates soar up and this can quickly drain your cash flow. Make sure that you pay off your loans as soon as you can to avoid absurd interest charges.

As you achieve progress in paying off your existing debts, it is important review your spending habits so that you do not fall into the trap of mishandling your finances. One way to avoid this is by creating a personal budget that will guide you on how much you can spend based on how much you are earning.

Always remember that prevention is better than cure and in terms of finances, avoiding debt is always best. However, there will be times when it will be inevitable. In cases like this, review the options that you have on how you can augment your current need and settle them immediately when their due date comes.