There are countless people out there who are under the burden of debt and have no idea how they will repay their loans. Problems increase significantly when you have more than one loan and paying every loan on time is almost impossible with the financial hardships facing most people these days. This means more and more interest payments being made while the loan’s principal does not reduces substantially and combined with the added costs of late fee charges. These kinds of things can only increase your financial problems, and in turn, your stress level. It is easy to see how, in this kind of situation, you would be better off only making one payment instead of a handful each month.
How can you do this when you have so many different people trying to collect money from you? This is where debt consolidation enters the conversation. By consolidating your debts, you can save not only time, but money as well. Debt consolidation is simply taking one large loan to pay off all of the small debts owed. Now you are only responsible to one lender for all of your money owed. By the end of this article you’ll know how you can actually save time and money if you choose to go for the consolidation of your debts.
Calculate Your Debts
First you need to figure out how much you owe to the different lenders. Make sure that you calculate current amounts with any interest or recent payments made. Once you have figured out how much you owe your creditors, you can work with the debt consolidation lender to get the outstanding balances paid off.
How can You Save Time with Debt Consolidation?
The benefits of debt consolidation will not be seen in a matter of weeks, but rather over a number of years thanks to reduced headache and financial savings. By choosing a debt consolidation strategy, you will be able to free up a lot of the time that you previously spent managing your debt. Sitting down each month, writing out a check or handling payments online can take a respectable time commitment. Many people have very busy lives which often times make it easy to forget small tasks like this.
Lower Interest Rates and Fewer Fees?
Even a bigger benefit for most consumers, saving money is the main focus of debt consolidation. Most people with high debt and bad credit face relatively high interest rates. By consolidating all of their debt out of multiple, high-rate credit cards and into a centralized loan with much lower interest charges, debt-ridden consumers are able to save a significant amount of interest paid each month.
Many times people turn to debt consolidation centers because they are so far behind in their credit cards and other payments that they feel they will not be able to catch up. In the meantime, they are consistently accruing more and more late charges on each account. By obtaining a loan to pay off all of their outstanding debt, they get out of the rut of monthly or continuously building late charges and start fresh with a brand new chance.
When Should I Consolidate my Debt?
Here are a few things to consider which may mean that it is time for you to consider debt consolidation:
- You are making more than four payments to credit cards or other loans each month.
- You have trouble finding time to sit down and worry about each individual account every month.
- Often times you miss a payment or send it late due to forgetting thanks to your busy schedule.
- You’ve been late on a few payments and your credit card companies raised your interest rates
- Overall economic interest rates have lowered recently.
Debt consolidation can be a heaven-send to many people who are in serious debt, but each individual situation is different so be sure to check for yourself whether it is the right choice for you. If you do decide to go with a debt consolidation plan, be sure to not begin spending too freely, feeing that you’re immediately in a better financial situation since you only have one payment to make. Many people quickly build themselves into more debt by failure to control their spending. Make a budget and stick to it and pay as much as you can to reduce the overall loan – otherwise you will find it difficult to ever get out of your bad financial predicament.