If you are in debt you may have been considering debt consolidation as a way to repay what you owe. However, before any decision is made about how you plan to repay your debt, it is worth asking yourself a few questions. It is also worthwhile performing a few tasks to get yourself up to a certain place where you can make a decision. Getting your finances in order, before anything else happens, should be your priority.
First of all you must ask yourself a few questions, just so you can get a handle of where you are financially.
How much do you owe?
To many people this sounds like the most obvious place to start. However, if you are in-debt your mind can work completely differently, illogical and emotional.
Even if you have a logical approach, it may take a little bit of digging around and finding out to establish just how much you do owe and to whom.
How good is my credit score?
Do you know how strong or weak your credit score is at the moment? You need to find out before you start making any decisions about how you can repay your debt.
You should never assume how good or bad your credit score is. Accessing your own credit file is easy too. All you need to do is apply at the following agencies and bureaus to discover what your credit file really says about you; TransUnion, Equifax and Experian.
How much do you want to be debt-free?
Motivation is key, especially when it comes to dragging yourself out of debt, and back into the black. Some people may only be motivated to make baby steps, whilst others will consider more radical options to become debt-free.
What you have to remember is any positive progression in dealing with your existing debt is a good thing, regardless of how big or small those progressions are.
Now that you have answered the above, you should be in a far better position to take control and make decisions on the different debt consolidation options available to you.
What is Debt Consolidation?
In its simplest term, debt consolidation is where you repay your existing debts with one other debt. This makes managing your debt a whole lot easier, as you only have to deal with one creditor.
Is Debt Consolidation Worth My Time?
It sure is, especially if you are using one of the best debt consolidation organisations out there. You may not have noticed, especially if you have been making a number of payments to different creditors each month, but repaying debt in this way is very exhaustive. Paying all of these debts at once, usually just after you have been paid, is both mentally and physically tiring.
If you decide to take out a debt consolidation product, you can make things a lot easier. Instead of making numerous payments each month to your creditors, with a debt consolidation product you are only making one.
It is not just the payments that make things easier for you. Once you have repaid your existing debts, to your existing creditors, you will find that you do not have to painstakingly engage and talk to each one of them. What a relief. You will not longer receive phone calls, letters or any other correspondence asking for more payments or increases on your existing payments.
Once you have repaid your debt to your existing creditors, you will not hear a thing from them. Imagine how good that is going to feel…
Where Can I Get a Debt Consolidation Loan From?
Getting access to a debt consolidation loan is a little bit harder today than it was a few years ago. With the recession came stricter lending criteria. However, if you look in the right places, you should be able to acquire a lender relatively easy.
If you are struggling to find a lender, you can always turn to friends or relatives. You can ask them for a consolidation loan, to help you repay your existing debts. A good way to go about this is to take it just as seriously as if you were requesting the debt consolidation loan from a bank. You can create and write up a loan agreement, which you and the lending party can sign.
The Risks of Debt Consolidation
Debt consolidation sounds great. You can repay your existing debts with one new debt. It makes managing your debt easier, but this can also be its downfall.
As your existing debt would have been repaid, in full, you may be tempted to start borrowing again. Getting another credit card, or extending your overdraft, they are both easily done.
So, in order for this not to happen, you must be as strict on yourself as possible. Never borrowing, and only spending what you can afford. The trick here is to only spend what you earn.
I’m Still Not Sure, Who Else Can Help?
There is a raft of agencies and charities that can help you, especially if you are looking for a little bit more guidance when it comes to repaying your debt.
These charities and agencies will provide unbiased and independent advice to help you manage your debt, as well as providing you with a number of solutions to help you repay it.
It is recommended that, if you have any questions about debt or just need some friendly advice, you go to them first, before anyone else. Unfortunately banks and other organisations with a financial interest will not provide you with advice that is best for you.
You Can Help Yourself
Obviously debt consolidation can help, but you can also do a lot to help yourself, even if you do not go for the debt consolidation option.
You can help yourself by setting up automatically payments that go straight to your creditors, on the day that you get paid. Stay disciplined and you can get through and become debt free.
Whatever you decide to do, making these first steps to become debt-free are always the hardest. Stay true to yourself and keep your goals in sight.