Debts can pile up quickly, if left alone. There are ways to get around this, such as with a debt consolidation loan. Here’s how you can benefit.
The Basics Of How Debt Consolidation Works
Debt consolidation is where all of your debts are gathered together, such as credit card bills or other owed fees, and are made into one monthly payment. This helps people get a hold of their finances and understand what they’re paying, sometimes even lowering the overall payments.
This is done by taking out a loan from a provider, who pay off all your debts on your behalf, leaving you to repay them back. They will usually agree a set fixed time for you, over a period of a few years, that allows you to spread out the cost, bringing the monthly payment down.
When To Consolidate
If you’re falling behind in your debt and bills in general, and there seems to be no way to recover soon, then it could be time to consolidate. Assuming your total debt, excluding your mortgage payments, doesn’t go over 40% of your gross income, then your credit score will be high enough to qualify for a 0% interest credit card.
These 0% credit cards, alongside a debt consolidation loan plan, allow you to pay off debts sooner rather than later, and deal with just one monthly payment. When it comes to getting a debt consolidation loan, you should use a reputable lender who have a customer first approach, such as at The Home Loan Expert. They offer, alongside other plans, a mortgage debt consolidation loan that allows you to use the equity within your home to structure a new loan, allowing you to gain money to pay off debt, and decrease monthly mortgage payments.
When Not To Consolidate
Debt consolidation is not always the answer, even if you’re In debt. If your debt is a small amount with only a few different bills, then consolidation serves no purpose to you. If you can pay off the debt within the year, then it will be better for your credit to do so, and you may not even end up saving anything through a plan.
You can use a debt consolidation calculator to work out if it’s worth it for you. They look at how much you have to pay off monthly, alongside their interest rates, to estimate how much you could afford to pay off and restructure your loan.
What You Can Do To Protect Yourself In The Future
Once your debt has been paid off, and you’re on the road to recovery, you should ensure you keep up to date with payments in order to avoid slipping up again. Create your own plan to avoid debt, that is tailored for your own life, for example, budget everything you can. You should put money aside in a savings account to have emergency funds.
If you feel there is something you want, that you can’t afford without a credit card, then you probably should not buy it. A credit card is not your money outright. If you can’t pay off the credit within a few months, then it could lead to more financial trouble.