Are you looking to bring your debt under control? Do you find you struggle to make your payments each month and need a better way to manage your bills? If so, a debt consolidation plan may be exactly what you need to achieve these goals.
This type of plan is exactly what it suggests. All debts are combined into one monthly payment plan often with a lower interest rate. How can you realize your debt consolidation plan? It’s easy when you follow these five steps.
Know Your Debt
How much debt do you have? Many people do not know the answer to this as they have been scared to look. It’s time to find out and to learn the interest rates for each debt currently owed.
The interest rate will be of great importance in determining whether or not you are getting a good deal on your consolidation loan.
The due dates and credit terms are also needed at this time to compare offers. Don’t overlook any debt that has been sent to collections either. When creating a debt consolidation plan, all debt should be included.
Determine a Reasonable Monthly Payment
The goal is to get out of debt so a borrower must determine how much they can afford to pay each month. Calculate current income and monthly expenses.
Be sure to only include income that is steady at this time. In the event something happens in the future, you need to know you can make the payment on the debt consolidation plan even if no other income is coming in.
Next, establish an emergency fund so there is no need to take on more debt in the event something comes up that must be handled immediately. The best way to accomplish these goals is to create a budget.
Know Your Goals
What do you wish to accomplish with this debt consolidation plan? A debt consolidation plan will lead to a temporary decrease in your credit score, as lenders do a hard inquiry before approving a loan.
If you have something planned and will need credit cards for this purpose, it may not be the best time to take out a debt consolidation loan. You need to be aware of this before proceeding and determine if other options should be considered.
Learn the Options
While finding debt consolidation companies isn’t difficult, you must ensure you are working with a reputable provider.
Furthermore, you must determine if you need a debt consolidation loan, a home equity loan, wish to do a balance transfer, or if a debt management plan is the best option.
Each has benefits and drawbacks to being considered. Even you can do the debt consolidation yourself.
Contact the Companies
Once a method has been selected, it’s time to begin contacting companies. Read reviews, speak to others who have used the company, and learn all you can about the terms and conditions.
Doing so ensures you find the right provider for your unique situation, as no two individuals are identical when it comes to their overall financial picture.
Follow these five simple steps to begin the process of becoming debt free. Although it may seem simpler to skip one or two steps, doing so is a mistake.
Each step brings you closer to financial freedom, which should be the ultimate goal. By following the process and avoiding the mistakes made by others, you’ll find you can reach your goal in less time than imagined.