Debt Consolidation – Where to Start?

With the global economy in an absolute turmoil, many are finding themselves in a bit of a predicament. To prevent their creditors from repossessing their house or car, some are desperately looking for debt consolidation. This can be a daunting project, as many are turned down, and tend to lose hope. So what are the options, and where do you start?

First, sit down and go through all your finances. Draw up a comprehensive budget. Sometimes this can give you a wake-up call as to where a lot of money disappears to during the month. Cut down on luxuries, at least until you are on your feet again. A lot of us are finding ourselves in the situation where every little bit extra will help.

Now that you are fully aware of your financial situation, calculate how much you need to be able to settle enough debt to have a sufficiently better cash flow.

If you are a home owner, you have could have one big advantage – property equity. If there is a positive difference between the value of your property and your existing home loan, you might be able to unlock these funds to use for consolidation of other debts.

But you might wonder, is it really wise to just replace one debt with another?

Well, if you are reading this article, it’s very unlikely that you are able to pay your bills comfortably, so you need to try to get to a position where you can afford all your commitments at the end of the month. Since your home loan is the “cheapest” kind of debt you can have, you are more likely to be able to service your commitment. So if you can use the equity in your property to settle all your other debt, or even just some, you will have a lower repayment at the end of every month.

If you are planning on using your property as the tool to consolidate your debt, the best is to let a professional assist your during the process.

If you’re not a home owner, you would have to look in a different direction. Some will opt for a larger personal loan to settle other smaller accounts. The aim is still to have as few repayments as possible at the end of the month.

The goal with debt consolidation is to increase your cash flow sufficiently that you can use cash instead of credit. By doing this you will avoid incurring more debt. You might even be able to pay of your debt faster than required.

If you are a home owner and would like to find out more about debt consolidation, or to get a quote based on your finances, apply online, and one of our friendly consultants will contact you.

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