Wouldn’t you like to get rid of your debt, wouldn’t it be great not having that burden on your shoulders constantly? Being debt free is truly an incredible feeling. It’s going to take some work to make it happen but it’s a completely realistic goal. Despite the feelings to the contrary you do have options, and one method of getting rid of debt that many turn to is debt consolidation. Before you choose that option there are some things to consider, here are some debt consolidation tips to make the whole thing a smoother process.
Write it down
Before you even consider consolidation write down all your debts including the monthly payments, amount you owe and the interest rates that you are paying to each creditor, be as accurate as possible. You need to have all of your information on hand before you move forward.
What can you afford?
Chances are right now you are having a hard time making all of your payments on time and that is why you are looking into debt consolidation. Sit down and create a budget that outlines all of your income and expenses and determine how much money you can afford on debt repayment.
There are plenty of financial institutions that offer consolidation loans and all of them will offer you different rates and repayment terms. Look at the fine print too, while the lowest interest rates seem like the best option, but not if there are huge balance transfer fees. Always look for the catch that could end up costing you far more than you want to spend.
What debts to include
Debt consolidation loans come with an interest rate and more often than not it is lower than what you are currently paying on all your debts. If you have an outstanding debt at a lower interest rate than your debt consolidation loan then don’t include it. Use the lower interest rate to pay of higher interest loans.
There are risks
Debt consolidation can save you money and make your life so much easier but it is not without its own risks. While you are paying off your loans you need to harness enough self-discipline not to create more debt in the meantime. Don’t start using those credit cards again!
Debt consolidation is not without pitfalls and it may not be the solution to your financial problems. If you follow these tips and learn from your financial mistakes you can become debt free and breathe a little easier.