Debt Consolidation – Many people are in debt struggling to pay their monthly bills. Most people are looking for help in creating a debt consolidation plan in hopes to be able to afford their payments and still be able to live. Some people will go to a consumer credit counseling agency, but many people are learning how to do it on their own.
Having a debt consolidation plan, individuals can determine the best way to get out of debt. There are so many different methods to getting out of debt, but all of them require you plan it out and budget it correctly. This will also help the individual to stay out of further debt.
1. List Your Debt
Always start out by knowing exactly what the total debt owed is. Grab a pencil and paper, and make a list of everything that is owed. Any cars, your house, student loans, credit card debt, store accounts, etc that is owed should be listed. Leave out any second mortgages or home equity loans. Rewrite the list in order, by the highest interest rate to the lowest interest rate.
2.Calculate Monthly Payments
Next calculate the monthly payments for each one of the debts listed. Write down the minimum monthly payment for each one. The goal is to reduce your monthly payment amounts.
3. Calculate Outstanding Debt
On the other side of each of your outstanding debt, write down the exact amount still owed. Add up the amount you still owe, as well as the monthly amount you spend paying your bills. Remember this amount does not include your everyday expenses such as petrol, utilities, food, etc.
4. Shop For The Lowest Interest Rate
Browse the different consolidation loans that are available today to help with your circumstances. There are secured loans and unsecured loans, but you want the lowest rate line of credit available. Shop until you can find the lowest rate with enough credit to cover your total amount of debt that you owe.
5. Contact Lenders
Contact the lender and explain that you are looking to rid yourself of your debt through their loan. This is extremely pertinent to tell them because some lenders when they look at your debt will not give you more credit than what you have. If you are closing the other accounts and getting rid of all balances, the lender is more likely to help you.
6. Create a monthly budget.
Once your old debt is paid off through the consolidation loan, it is exceptionally easy to fall back into the same amount of debt. Do not allow yourself to make that move. Track all you’re spending, and make sure your loan is paid off first.
Always pay as much as you can on the consolidation loan so that you will pay it off faster. It is crucial to be strict with your spending during this time. It is very easy to fall back into your old spending habits that got you into the mess you are in. Do not indulge or overspend with the extra cash flow you may see each month. Save, and work on getting rid of the debt completely.
Debt is something that weighs people down. Debt can truly change anyone’s mood and entire personality. Once you remove yourself from debt you will feel like you are finally free. The freedom you will feel will make it entirely worth it. Do not give up as you work towards freedom from debt!
* information correct as per time of posting