Sometimes, all it takes to be debt free is to find a systematic way of paying it off. The come-what-may attitude may get you deeper into debt and no where near your financial goals.
Any debt relief program is systematic. With debt consolidation loan however, you have to be careful because there is no professional assisting you unlike the others. This is why you have to know the process before you can successfully use it to your advantage.
First of all, you need to be able to make the minimum payment – or at least, only have a small deficit to it. Once you conclude you are able to make minimum payments, here are the steps you need to take to make debt consolidation work on your favor:
Step One: Self Realization
Accept the fact that you are in debt and figure out how much you really owe. This is a crucial step for you to move forward. You need to tally all the payments you are making monthly to find out the amount you are paying off on a monthly basis.
Step Two: Do the Math
Once you know the full amount of monthly loan payables, look at the nature of each for interest rates paid and if there are any prepayment penalties in the the event that you pay off your loan. This is a good decision point if getting a debt consolidation will be beneficial for you. It will also guide you in shopping around for the best lender.
Step Three: Explore the Lender Market
You need to look for a credit lender that will offer the best deal for you. But do not send out too many applications. This could and will backfire on your credit score. Shop around trustworthy recommendations or do the research on your own. A lower interest rate offered by a lender might lead to savings for you down the stretch. Prepare income documents as well because this will be the basis of lenders in taking a gamble on lending you money. They need to be convinced that you have the ability to pay off your loan.
Step Four: Go Back to the Main Objective
Once you find the right lender at the best rate, remember your main goal in choosing debt consolidation – to pay off all your debts and to manage one payable a month. It is much more simpler to remember one payment a month rather than juggling five debts each with different due dates, different interest rates and different penalties. As soon as you get the funds from your lender, pay off all your loan and close all credit cards. You can choose to keep one open in case of emergency.
Step Five: Pay Off the Debt
This is too important that reminding you again seems just right. You might have the temptation to use the money elsewhere. This mentality will get you deeper in the red.
Step Six: Do an Attitude Check
Probably the clincher of all the steps and another crucial understanding is attitude adjustment. Look at how you got into paying a lot of debts in the first place and steer away from that mentality. You might think that you now have less payments because you are just paying one debt a month. Falling into this false sense of security might encourage you to spend again and again. The next thing you know is you are in a lot more debt than from the time you started debt consolidation.
These steps will help you make the most out choosing debt consolidation loan in achieving a debt free lifestyle.