Ah the word Debt Consolidation Loans has struck much debate on whether it is such a great one solution wonder or just another loan facility which will create an escalating debt disaster. There are supporters of debt consolidation loans and there are the naysayers. Those who have benefited from debt consolidation loans have much good things to say about it relieving their financial burdens whilst those who went on a downward spiral swore against it.
Just exactly how good or bad a Debt Consolidation Loan is depends on how you use it. The most important factor in making or breaking such a loan is your financial discipline knowing what you want out of it and sticking with your financial plan. To make the most out of a Debt Consolidation Loan and ensuring that it really helps to consolidate your loans and relieving you of your surmounting debts, there are really a few things you ought to know and apply.
1. Before taking up a Debt Consolidation Loan, consult a professional debt counsellor to assess your options. A certified financial planner may be able to assist you as well and may not be biased towards debt consolidation loans as compared to seeking out advice from the debt consolidation loan companies.
2. Calculate your current outstanding debts and the interests payable and estimate how long you will take to clear your outstanding debts if everything remains status quo. Then, calculate what options the Debt Consolidation Loans can offer you and whether you will be able to save more using the latter compared to staying status quo.
3. Have you considered a debt consolidation mortgage instead which is likely to give you a lower APR or Annual Percentage Rate? It may be a cheaper option compared to a debt consolidation loan.
4. How about debt settlement with your creditor where you offer them a lump sum in exchange for a discount on the total outstanding debt payable? It may be a faster and more worthwhile option to settle your debts immediately with a discount.
5. Dont go into Debt Consolidation Loans without familiarising yourself with the fees, charges, interest rates and terms and conditions which come with it. You would not want to put yourself in a position which is worse that before. Your goal is to reduce your financial problems, not prolonging or making it worse. Just because it works for others does not mean that it will work for you as each individuals financial circumstances vary.
6. Once you have successfully applied for a Debt Consolidation Loan, you should consider discontinuing the use of your credit cards, store cards or even overdraft facilities until you have fully repaid your Debt Consolidation Loan. Use cash instead for your purchases so that you will be able to monitor your day to day expenses whilst keeping tabs on your monthly instalments with the Debt Consolidation Loan.
7. Change your spending habit. Something must have gone wrong in the first place which resulted in you having accrued numerous outstanding debts which necessitate the restructuring of your outstanding debts with a Debt Consolidation Loan. Analyse your spending habit and identify which areas you may have overspent or spent without consciously knowing its impact on your financial line eg. smoking, gambling and drinking. The Debt Consolidation Loan is the start of a new life towards being debt free and you should remain disciplined to see through the full payment of your Debt Consolidation Loan. Changes to your lifestyle may be required and if it helps you to achieve financial freedom, it is definitely a worthwhile change to consider.