Living with Debt without worries – How Debt Consolidation can Help?
Easy
availability of loans and other options of financing available to individuals
have made it very difficult to deal with loans in a restrained manner. Credit
cards especially make it appear that availability of money for fulfilling
wishes is never a problem, which it truly is but the problem starts when you
max out your credit and start borrowing from many other sources. Suddenly, you
find that monthly payments that had been manageable so far turn into
unmanageable debts. The same can happen
for businesses that engage in over borrowing and become debt-ridden in no time,
not knowing how to get out of the problem. Since loans are the backbone of
business financing at all stages of business, depending on loans for
maintaining smooth operations and business growth is a necessity as it helps to
streamline cash flow.
Credit: LendingMemoWhen you are neck deep in debts, it seems that the debts keep staring at you and it leads to a situation when you are unable to make timely payments, and the burden of debts keeps piling up rapidly. Debts which had seemed of immense help at one point in time suddenly make you feel sick, and you desperately look for ways to get out from the vicious cycle of debts. Doing some firefighting by trying to knock off the larger debts first might provide some temporary relief, but soon it seems to be just not enough to address the main problem. Not knowing what could be the best way to keep debts under control leads to further stress that can have damaging effects on your credit score and financial future. It might lead to businesses filing for insolvency and going bankrupt, and the same can happen for individuals.
Customized debt relief plans
In such situations, knowledge about various methods of debt relief should come in handy. Debt management needs specialized knowledge, and the professionals of debt management companies like Nationaldebtrelief.com can help you a lot in this matter. Debts are debts, but the methods of debt relief are many that depend on the analysis of the situation faced by individuals or business. Understanding the pain points of borrowers and their financial capabilities are essential to draw a proper plan for debt management. It means that no two debt relief plans are the same because of its customized nature that takes into consideration the best interest of borrowers.
Seek advice
Debt-stricken
individuals need sound financial advice that provides the much-needed support and
direction in debt relief. In most cases, dealing with too many lenders and
managing too many loan accounts becomes a stressful task and, in such cases,
debt consolidation is the ideal solution for debt relief. Remember that
borrowers would always welcome any move that helps to manage debts better
because they want to continue with debts to stay afloat and manage their
finances better. Understanding the
options of debt consolidation and knowing about the best practices should give
you a boost towards better debt management.
Evaluate your debt first
Self-evaluation
is most important in your journey of debt relief. If you know what you are up
against it is like winning half the battle. Consumer debt is always very high
in the US, and it peaked during the recessions that started in 2008. Therefore,
it is not unusual that individuals carry several debts spread across different
accounts and lenders. From credit card debts to student loans and from car
loans, and personal loans to taking loans for paying excessive medical bills mostly
unplanned – so many different types of debts often become necessary to bolster
finances in the short term. When seeking debt relief, you must first understand
where you stand in terms of outstanding debt by looking at each loan account
closely and then use an online debt consolidation calculator to work out a plan
of plugging the gaps effectively.
Make a comparison
The focus must
be on the balances you owe, the monthly payments you make and the rate of
interest that you bear. If you have some
loans with fixed payback period, you must find out the remaining tenure of the
loan. For credit card debts, you must base your calculation either on the
monthly payments that you have budgeted for or the minimum amount that you must
pay for the outstanding amount. Using a debt
consolidation calculator should help you to not only add up the outstanding
balances but also provide a comparison of your loans in a consolidated manner.
By using the
data, you can paint a picture of your financial future by comparing your
present with the possibilities that lie ahead if you go for debt consolidation.
The debt consolidation calculator will work out a monthly payment figure by
considering that you will take a fresh loan at lower interest than the weighted
average of the current interest rates and effectively your monthly payment
would go down considerably. The
calculator will also show the time it will take to pay back the existing debts
at the current rates and the time that it will take to repay the new loan which
will obviously be shorter.
On completion of the exercise, you will have a firm understanding of the extent of debt you are currently having and the amount you are paying just to stay afloat. Most importantly it will reveal the numbers that tell you about the prospects of consolidating the loans that lower monthly payments and generate savings too.
Control expenses to plug the gaps
Debt
consolidation helps to resize the debts and at the same time replace several
lenders with just one. However, you must ensure that you can make monthly
payments which often people fail to make due to heavy expenditure. Keeping
control of your expenses is extremely important to maintain the right cash flow
so that you can make monthly debt payments in a disciplined manner. Debt consolidation gives you the opportunity
of rebuilding your finances by learning important lessons about your borrowing
habits that largely depends on your spending pattern. If you are a reckless
spender, it is natural that you will keep taking loans and stressing your
finances. Therefore, being careful with expenses by spending judiciously should
help you to keep debts under better control.
Define and
monitor the monthly spending by its nature like housing, food, transportation,
insurance, entertainment, healthcare, cash contributions, apparel and services,
and other expenditures. The exercise could be an eye-opener for you as you can
figure out the potential areas of over-spending and identify the areas where it
is possible to cut back. You get the guideline for long term sustainability
even after you pay back debts.
Take a debt consolidation loan
Debt
consolidation loan like housing or car loans are special because unlike
personal loans or credit card loans that do not have any specific purpose of
use, debt consolidation loan is for the exclusive use of settling previous
loans and equivalent to the amount of outstanding loans on a particular
date. By using the services of debt
relief companies that specialize in debt consolidation you can get in touch
with lenders who are ready to offer debt consolidation loan.
The debt
consolidation company mediates on your behalf with lenders by building a case
that justifies your stand to use the new loan for restructuring your
debts. By using your credit report and
credit score that the debt consolidation would ask for, they would justify your
stand to borrowers for securing the loan easily. You can get a free credit
report every year from any of the credit rating agencies like Equifax,
Experian, and TransUnion.
New credit for debt payment might not be necessary
By assessing
your current financial position with due consideration of account and all
liabilities in addition to the debts you are well placed to weigh your options
in debt consolidation and create the right strategy for debt relief. Accessing
new credit for settling earlier debts might not always be the only or best
option for you. You might have the powers of paying the debts without further
borrowing, but you are just not aware of it.
Doing your arithmetic once again and reworking on your budget could help
to realize funds that you can use for paying back debts. If you are ready to make some sacrifices by
controlling your monthly expenses, you could discover a newfound financial
power that helps to pay back debts without seeking new credit. Once you
identify your strength, you can re-negotiate with lenders and ask for a lower
interest. Credit counselors can guide you in this matter so that you can
achieve your goal.
Whether you take new credit or not, consolidating
loans, provide considerable relief because you deal with a single lender that
is always easy to manage. It does away with
the stress of monitoring multiple debts that entail different payment dates,
different interest rates and handling different lenders that often become too
much strenuous. You can start a new
journey in managing your finances and use the lessons learned earlier that
makes you a wiser borrower who knows how to live with debts without worrying.
The post Living with Debt without worries – How Debt Consolidation can Help? appeared first on Entrepreneurship Life.
