Debt can greatly impede one’s financial life; the amount of money you can save, the Investments you can make, and lots more, can be greatly affected. The higher the interest rate, the more the debt increases and the longer time it will take to pay off.
If you are stuck in a huge debt situation, you’ve got to make a plan to pay off your debts and begin to live your best financial life. And the most effective solution is debt consolidation.
Consolidating your debt will help you pay off your debt faster and with lesser interest. It will help you cut down on expenditures and enable you to spend wisely.
If you are ready to get rid of your debt and unlock your best finances, here is what you need to do.
3 Ways To Unlock Your Finances using Debt Consolidation
With debt consolidation, your consolidation company/lender will lend you the amount of money you owe to pay off your debt. However, there are processes to this;
1. Total Your Debts and Prequalify
First, you’ll have to add up your debts starting with the debt with the highest interest rate to the lowest. This will help you to know the total amount you owe and your priority.
Here’s an illustration. Assume you have six different debts:
Payday loan $200
Car loan $100
Payday loan $200
Medical loan $700
Credit card loan $300
Personal loan of $400
You can consolidate as many debts as your consolidation loan can carry. But you must know that not all debts can be consolidated.
Once you’ve known how much debt you owe, then you pre-qualify to get loan approval. Prequalification helps you to know the loan amount, interest rate, and term you qualify for without damaging your credit score.
If your consolidated loan amounts to $4000, you will need to get approval for a $4000 consolidation loan to pay off your outstanding debt.
2. Sign Up
Next, apply to banks, credit unions, or online lenders to secure a personal loan. This loan amount should be equivalent to the total amount of debt you owe.
3. Get a Loan
Once you’ve been approved, you’ll receive the amount you need and pay off your debt. However, if the amount you received for loan repayment is lower than your outstanding payday loan debt, pay the highest-interest loans first. By doing so, you will escape the situation of having to pay the high-interest fee on that debt.
Your debt consolidation loan can be in the form of:
- Personal loan
- Home equity loan
- Home equity line of credit
- 401k withdrawal
Conclusion
Debt keeps one from achieving big financial feats. Nevertheless, you can choose to merge all your numerous debts to become a single debt, discipline yourself and pay in installments to your loan company without missing your payments, then you are on your way to securing your personal finance with the help of debt consolidation.
