Debt is a serious issue that plagues families across the country. It’s a massive issue for people around the world, in fact. Debt creeps up on people and in many different ways. There are lots of different kinds of debt that can encumber a person, and if that person isn’t careful they can become completely consumed by that debt.
If you’ve found yourself in this position, you may want to consider debt consolidation. Having your debts consolidated will ease the burden you’re carrying right now. Feel free to visit Latitude for debt consolidation advice and counselling.
What Is Debt Consolidation?
Simply put, debt consolidation takes your debts and merges them. If you have many outstanding debts to be repaid, you can roll them into a single, lower-interest payment that reduces your total debt. It also reorganizes the total debt so you can pay it off faster.
There are two ways that debt can be consolidated. You can get a 0% interest balance transfer card, onto which you can transfer your debts and pay them off completely during a specific period. You can also get a fixed rate loan, which will pay off your debt, meaning you then have to pay off the loan in instalments over an agreed-upon term.
Is It Right For You?
Consolidating your debt is a big decision to make. It looks simple, and then you read about different ways it’s done, and it’s confusing again. The only person who knows for sure if it’s the right move is you. Here are some questions that will help you determine whether debt consolidation is the correct path of action.
Will I Get Better Interest Rates?
You are trying to get out from under interest rates by consolidating. Debt consolidation vendors will carry their own interest rates, and for the most part, they are lower than what you are currently paying. There are a few that will be higher, but with some research, you can definitely find an interest rate that works for you.
Is it Difficult to Make Multiple Payments?
Multiple lenders mean multiple payments. Do you owe more than one lender any money? Are you having trouble keeping up with a pay structure that keeps them happy? Most of the time, different lenders have different payment dates. That means you need to keep a tight schedule to stay on track. With debt consolidation, you only have one date to worry about.
Have Your Tried to Get Out of Debt Already?
It may be a worthwhile effort to try everything in your power to reduce your debt on your own before consolidating. Monthly budgeting is a good strategy even if you aren’t in debt. Who doesn’t like some money leftover at the end of the month? If you have debt, that money can go towards paying it off.
Having a plan to pay off the debt is good too. Whether you pay your lowest interest debt first before moving on to the second lowest (debt snowball) or tackle the highest interest payment (debt avalanche) you should have a payment plan in place.
Do You Know Why You’re In Debt?
Just because you can consolidate and pay off your debt doesn’t mean you’ll be debt free for the rest of your life. Understanding how you got to be so deep in the hole is very important to avoid having it happen again. It’s not the large items we care about either (cars or houses) – it’s the frivolous credit card purchases that should be examined. Did they get you in this mess? If so, you need to get those under control before you can get better.
Make the Right Call
There’s no need to live in fear of your debt. You should be cautious of your interest, however. By answering some simple questions you can get to the bottom of your debts and decide what your next move should be. Whatever that decision may be, making a choice now on whether to consolidate your debts or deal with them yourself can save you thousands of dollars in the long run.