Being in debt is one of those life issues that sucks. Nobody wants to be in a situation where they have a mountain load of debts to worry about. According to reports, a large number of Americans are stressed out and the major reason for this stress is money.
The number of credit card and payday loan debt being owed by people keeps increasing annually. However, it is possible to get out of the debt cycle if only you know how to go about it. In this article, you will get to know the best way to consolidate debt as a professional and common debt consolidation mistakes to avoid if you decide to consolidate your debt.
Preparing for Debt Consolidation
While it is possible to consolidate your debt all by yourself, some people may not find it an easy task. It is important to seek the help of a professional to give you the required advice needed to take care of those debts.
However, you may decide on the do it yourself approach where you take on the responsibility of consolidating your debt all by yourself. Taking the “solo” approach to debt consolidation will require that you equip yourself with the required information that would help you knock off those debts like a professional.
But before embarking on the journey, you must come up with a plan that would help you actualize your goals. What are the things you are required to do to start your debt consolidation journey on a good footing?
- Know your standing: before going ahead to consolidate your debt, it is important to have a general idea of the amount of debt you are trying to pay off. The best way to do that is to go back to your records and make a list of everything you owe including the amount of interest that you are required to pay. Since consolidation entails taking out a huge loan to pay off all your loans, knowing the total amount you owe is to your advantage. It would help you know the amount of loan to apply for and assist your decision-making process.
- Get a copy of your credit report: you may be wondering why you need a credit report before consolidating. Your credit report shows your credit standing and goes a long way to affect the decision of loan companies, especially for most unsecured loans. A poor credit report can affect your ability to get a loan and knowing this will better prepare you on what to expect when applying for a loan and how best to make your loan application.
- Calculate your monthly income: this may seem so obvious but a lot of people may not be able to accurately say how much they make in a month. This is one of the reasons some people are in debt because they end up spending above their means. Knowing your financial standing in terms of the income you earn will help you better plan yourself and come up with the best repayment strategy to pay back the loan.
- Come up with a budget: a budget is one of the easiest ways to discover where you are experiencing a cash leak. A budget gives you an overall idea of where the bulk of your income is going. By studying your budget, you can cut down on things that are not necessities so that you can have more money to channel towards the repayment of the loan.
- Research the debt consolidation strategies available: there are several ways to consolidate your debt. Different strategies are ideas for different individuals based on the peculiarity of their situation. To be able to make the right choice, it is important to make the necessary findings that would enable you to make an informed decision on the strategy that is best for your situation.
Debt Consolidation Pitfalls to Avoid
Many people make some preventable mistakes while trying to consolidate their debts. Here are common debt consolidation pitfalls to watch out for:
- Not asking for advice from professionals: while it is possible to consolidate your debt all by yourself, it is also important to involve the professionals where necessary. Before opting for a debt consolidation DIY, ensure that you already have enough information that would help you avoid any form of mistake.
- Not making a wise choice: there are many debt consolidation companies with each offering specific services to their clients. It is important to analyze each offer by comparing it with your total debt. If the interest on a debt consolidation loan is higher or the same as that of the debts you are trying to repay, you will not be able to maximize the benefits of consolidation. It is therefore important to ensure that the interest rate you are expected to pay is below what you currently owe.
- Failing to address the root cause of the debt: at the root of every debt is financial recklessness. Many people end up in debt because they are unable to monitor their spending with their income. This results in them spending more than they can afford. To ensure that one does not get caught up in debt again months after consolidating, it is important to address the root cause of the problem.
- Not adhering to the repayment plan: once you apply for a consolidation loan, you will need to have a repayment plan in place. This repayment plan makes it possible to strategically repay the loan within the specified period. Without a good repayment plan, it is extremely difficult to meet up with your payment schedule. Therefore, ensure you have a plan in place.
Conclusion
It is possible to consolidate your debt by yourself without consulting a professional. However, to do that, you will need to equip yourself with the necessary information needed to make an informed decision. If you need help with your payday loan consolidation, credit card debt consolidation or payday loan relief, don’t hesitate to contact the experts at Solid Ground Financial.
