Staying on top of your monthly expenses is becoming increasingly difficult as making your salary stretch to cover these costs is getting harder and harder. This forces many people in to a position where they have to supplement their income by taking out extra credit via credit cards or applying for short term loans to cover these costs. This may seem a good option to begin with, but you may find that those extra monthly payments become more of a burden and could ultimately put you in a worse financial position than when you started.
Managing your debts can be overwhelming and it’s sometimes easier to ignore them rather than tackle them head on, but we all know this is not a good option. So here are a few a few ideas on how you can get to grips with your debts and continue to pay all your usual monthly expenses.
Is Debt Consolidation an option?
Out of all the options available, Debt consolidation should be one of your considerations as it’s been proven time and again to be one of the most effective ways of becoming debt free. Here’s how it can help;
· Reduce your debts to a single monthly payment. When you take out a debt consolidation loan, what you are effectively doing is taking all your monthly debts and wrapping them up in to a single affordable monthly payment. The total value of the loan may be higher than your initial debts but the payments will be more affordable and easier to manage.
· Working to improve your credit rating. If you are successful in your loan application you will in effect be improving your credit score as all your debts will be paid immediately paid off leaving you with only your loan payment to keep up with.
· Reducing the amount of interest you pay. Every time you make a payment towards you debts you may find that a proportion of your payment goes towards interest payments. Paying off your debts in one lump sum with debt consolidation will mean you are no longer paying those interest rates.
· An easier life. Most people hate those dreaded phone calls from creditors as well as those horrible letters demanding payment or threatening court action. Paying off your debts will stop your creditors from hounding you, and you will feel so much more relaxed and happier within yourself as you take control; of your debts.
· Becoming debt free. Always keep it in mind that the main goal here is to become debt free over the period of your debt consolidation loan.
Will consolidating your debts be the right option for you?
You must bear in mind that although debt consolidation has helped thousands of people to become debt free it may not be the right option for you. Generally, a debt consolidation loan should only be considered if you owe up to around £1500. If your debts have affected your credit rating you may have to secure your loan against your home which may be at risk if you don’t keep up your loan repayments. You may find it difficult to get an unsecured loan but if you are successful in your application you will probably pay a lot more interest and your monthly payments will probably be higher. This brings us to the second point that you must be sure you can afford the monthly loan repayments. You must be honest with yourself here as you don’t want to be in a worse position then when you started.
Try to resist any other loans, credit cards or other credit agreements until you are in a better financial position or until you have paid off your loan. Many people get caught in the trap of borrowing more money to get the luxuries they can’t really afford when committing to debt consolidation. You must always remember the end goal of becoming debt free and making your life so much easier.
There are alternatives to debt consolidation such as Debt Management Plans, Individual Voluntary Arrangements (IVAs) and Bankruptcy that may be more suited to your personal circumstances so be sure to check out my other articles before making your final decision.
