Pay Off Your Debt with a Few Smart Debt Consolidation Tips
Debt can be a rather embarrassing experience, which is why most people usually keep it a secret. There are a lot of things you have to remember once you're in debt, but here are the first things you should keep in mind.
First, everyone, at least once in their life, has undergone debt. It's an unavoidable reality, and it's nothing to be embarrassed about. Second, having debt doesn't make you a stupid person. You might have made a mistake by borrowing money that you can't pay back, but that's not the end of the world. You didn't know better back then, but now, you do.
What options do I have?
Debt consolidation comes in two forms, as a loan or as a debt reduction plan.
Basically, the first option entitles you to creating a new loan to replace the old one, with the hopes of repaying your debt. The advantage of this is that all your debts are combined together in a single loan, so you only have to make a single payment per month. Some people may complain about this option adding more debt to what you already have. Perhaps this is the biggest drawback of using a loan, but there are a lot of benefits as well. Due to lower interest rates, you will pay less per month than what you used to. These debt consolidation loans usually last for a maximum of 5 years.
On the other hand, a debt reduction plan offers you a chance to pay off your debts by helping you change your lifestyle. With the help of debt counselors, a budget will be laid out for you depending on your debts and expenses. They can also talk to your lenders to reduce or to eliminate certain fees. However, you'll have to pay your debt counselor as well, and this might be a drawback for some.
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Can I do it on my own?
Of course you can! Debt consolidation is possible if you have the willpower and determination to pay off your debts. The sooner you start, the earlier you'll be able to pay them off. For those of you who would rather brave the battle by themselves, here are a few smart debt consolidation tips you should consider.
Admit that you're in debt.
Most people might not consider this a step, but this is the cornerstone to the debt consolidation process. If you fail to do this step, then everything else will be useless. You have to admit to yourself that you're in debt. Don't blame your friends or the economy it's all on you. And it's up to you to get out of this situation as well.
List down your debts.
It might be excruciating to list them down, but this is a must. This will help you keep track of what else you have to pay. For your credit card debts, list down the interest rates, outstanding balance, minimum payment, and due date. It's better to be organized because this will help keep things in check.
Don't stick to the minimum payment.
Don't make the minimum payment your goal. Usually, the minimum payment covers only the interest rate. Set the standard a notch higher. Paying higher than the minimum will make paying off your debts faster and easier.
Don't make the mistake of borrowing even more money, or using your credit cards even more. That's just going to put you in a vicious, unending cycle of borrowing, owing and paying. When you're making a purchase, use cash or a debit card. Even better, leave your credit cards at home.
Make a budget.
Having a budget will help you keep track of your expenses. This way, you're only spending for things that you need. Cutting down expenses is good as well. For instance, instead of spending money for lunch at work, a packed lunch is a cheaper alternative.
Pay on time.
That's why you should list down all your debts. If you fail to pay on time, the interest will just keep piling up, pushing you further into debt.
Prioritize the highest interest.
Commonsense dictates that you do this first. Pay more than the minimum for the debt with the highest interest, and pay minimum for the rest. Keep doing this until you pay them all off.
Once you pay off all your debts, you'll feel instant relief like the weight of the world was just removed from your shoulders. Next time, you might not be so lucky! Keep in mind to borrow only what you can pay.
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Posted in Health and Medical Post Date 12/19/2015