Consolidate Debt Loans Before It Is Too Late
Article by Lee Beattie
Americans are swimming in debt; one of the best tools for getting out of it is a consolidation loan. Debt consolidation loans are only going to help you if you have the fiscal discipline to not secure new debts while paying off the old ones.
Debt consolidation loans come in two varieties. The first is a consolidation loan that’s unsecured you’re your debt is less than 20% of your annual income, this is usually not that hard to get from your bank or other financial institution. If your debt to income ratio is higher, any kind of consolidation loan will need to be secured by some tangible asset, such as your home, or in rare cases, your automobile.
Consolidation loans are usually built around a short term pay off rate – seven years or less, and are typically structured to be a payment that’s easy for you to make. As a general rule of thumb, most credit counselors recommend that your monthly debt reduction payments be no more than 20% of your monthly income; if you can afford to make double payments on a debt consolidation loan, paying more now will save you much more money in the long term, due to the way interest on debt is calculated.
Before getting a debt consolidation loan, it is always worth your trouble to comparison shop, and work from the most current information possible. Talk to a credit counselor and your bank before signing any kind of debt consolidation loan paperwork, and read the fine print. Look out for high up front fees, or penalties for early payments; also be on the lookout for “adjustable rate” loans; you can bet that the rate will go up at some point in the future, and it may be significant enough that it will double your payments in a given month.
While you’re working on your debt consolidation, take the time to restructure your spending habits. Fiscal discipline is more than just paying your bills on time, it’s making a budget and sticking to it. The reason most Americans are swimming in debt is because basic finance isn’t really taught that well in schools. Most Americans have no idea how interest is calculated, and they live paycheck to paycheck making minimum payments. If you’re going to get a debt consolidation loan, hide your credit cards – put them in a safe deposit box, and leave them for emergencies.
While you’re working on your debt consolidation, also look at your total lifestyle. Look for things you can trim out of your monthly budget; if you go to Starbucks every working day, on a month with 20 workdays, that’s 0 or more for coffee. Similarly, if you go out to lunch every day, learn to pack one in; you’ll be amazed at what cutting per day out of your daily expenses can do for making your debts evaporate.
Ultimately, you want to live on 90% of what you earn, and save the rest. Let interest (from bank, money market and mutual fund accounts) work in your favor, not to the benefit of your creditors. It’s easy to get in too deep on your credit, and turn credit into a sinking pit of quicks and; getting out of it takes careful planning and a sense of responsibility, and debt consolidation loans can be a critical part of this process.
Another aspect of debt consolidation loans worth mentioning is that they can make your payments more regularized; no more missed payments, no more late fees – you know the debt has to be paid on a single point in time. With all your debt consolidated to one bill, it’s harder for it to slip through the cracks; you just put it on the payment register like rent, utilities and groceries.
If you would like more information on this topic and other credit repair topics learn more about how to Consolidate Debt Loans and many other topics.
Lee Beattie the creator of Beatlands Credit Repair site. I have written this site for those who have fallen on hard times and haven’t always thought of the right ways to get out of a credit blunder. I wanted to educate and help out those who do not know the right direction to take during hard times.
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