Americans seem to have developed a fascination for debts. We know that an average household in the United States owes over $132,000 comprising mostly mortgages, costly lines of credit, and also, high-interest outstanding credit card debt. It has become somewhat easy to accumulate extremely high balances and things, therefore, get out of hand without you even realizing it. Most of you are struggling with overpowering debts that seem to be never-ending. Fortunately, many experts have recommended an effective solution to the issue of overwhelming debts. You need to essentially take out a debt consolidation loan with a lower rate of interest as compared to your existing high-interest debts. You would then effectively use that bigger loan for paying off your multiple higher-interest debts and in the process, save hundreds or even thousands of dollars thanks to the new lower interest rate.
Let us find out what exactly is debt consolidation? Debt consolidation is supposed to be the method of rolling your multiple high-interest debts into one single lower-interest loan. This bigger loan would help in reducing your total outstanding debt amount and generally, it is structured specifically for paying off debts faster. Let us explore some amazing debt consolidation tips.
Determine What Exactly You Need
As per https://www.forbes.com, you must start by figuring out precisely what amount you would need to borrow as a debt consolidation loan for covering multiple existing smaller but high-interest loans. You need to accurately add up the total amount you owe to various creditors. You may take out a debt consolidation loan that is equal to your total amount owed but some debtors often take out a bigger loan as compared to their total debt simply to take care of some other balances or bills.
Take the Right Decision Related to the Repayment Period
Different lending institutions or debt consolidation companies would be offering different debt repayment periods or loan terms. You need to decide precisely what loan term would work best for you depending on the amount you are capable of spending every month. Once you are sure about precisely what you are looking for and exactly what you could pay, it would be a wise decision to compare the debt consolidation products available in the market. Experts recommend taking the help of an efficient debt consolidation calculator for figuring that out.
Compare Debt Consolidation Products
Balance transfer cards would allow you to transfer your debts from some other cards and you would not be charged any interest for a specific period. Some of the best balance transfer cards are known to offer 15-21 months of the grace period. Once that period is over a high double-digit rate of interest would be applicable. Most cards would be charging a specific balance transfer fees. You must have a robust credit score and even high incomes for qualifying. For boosting your chances of acquiring a balance transfer card, you may consider adding up all your potential income sources including both your 401(k) and savings account and enter the total amount on the application along with your salary.
Examine All Charges & Fees
Some debt consolidation companies would be charging origination fees that are charged for processing the loan and these could amount to as much as 5% of your entire loan amount. There are yet other companies that would be charging prepayment fees that are supposed to be paid by the borrower if he pays off the loan well in advance. Always read the contract carefully and look for any kind of hidden fees. Seek professional assistance from trustworthy and experienced companies such as NationaldebtRelief.com for perfect and prompt solutions.
Examine the Interest Rate
If you wish to find out what rate of interest you could get given your eligibility considerations, you could do so by using certain advanced digital tools and calculators such as Check Your Rate from Discover. You could get an idea before applying for your debt consolidation loan, what rate you could be entitled to, without adversely impacting your credit score.
Ensure That the Consolidation Stratagem Is Affordable & Faster
You must determine the precise reason why you are opting for debt consolidation. This is a vital piece of your puzzle, suppose you are not aiming to pay off the outstanding debts faster, there is no need to try debt consolidation. Suppose your loan comes with a longer loan term because of consolidation, you may ultimately end up paying more as compared to your original loan. Hence, you need to assess the affordability of a loan and even consider the loan term to calculate the total amount you would need to pay towards interest.
Make Sure that Debt Consolidation Leads to Lower Interest Rate
Your debt consolidation loan must come at a lower interest rate. It makes no sense to roll your 10 percent + 5 percent interest debts into a 10 percent debt consolidation loan. You have to ensure that debt consolidation makes good sense before you take the final plunge. For instance, one of your student loans comes at 4 percent and you get offers of debt consolidation loan at around the same rate. So that’s not worth the effort.
Consider Applying Online
The application process would be taking just a few minutes if you do it online and most lenders offer online debt consolidation. However, some people put in loan applications via the phone or mail. Most debt consolidation companies would need your Name, Full Address, and most importantly, Social Security Number. You would require answering certain questions relating to your monthly income, the amount you would like to borrow, and the housing debt. As per experts, the online application process is fairly straightforward and you could get the loan approval right away.
Consolidate Your Debts
When the loan approval is achieved, the consolidation process starts. Generally, you do not require worrying about making the payments yourself towards the debt. The lender may pay off all your loans promptly on your behalf. Funds would be sent to your creditors once your debt consolidation loan request is accepted.
Make Regular Monthly Payments
The most important tip is to religiously make the debt repayments every month. Thanks to debt consolidation, you simply need to make a single monthly payment and you need to remember just one due date. Be serious and consistent about making the monthly payments regularly. The best way is to consider setting up bank withdrawals regularly just to make sure that the amount you owe would be taken out automatically of your bank account. These withdrawals must be consistent until your balance dips to zero. You may use one or more cutting-edge apps to track your debt repayment progress. You may even receive monthly statements that demonstrate your progress.
Conclusion: Seek Moral Support to Achieve Your Goal
When you are neck-deep in debt, you feel ashamed of yourself. You feel guilty, down, and depressed due to the overpowering debts. It is best to share your feelings with a close friend or relative to seek moral support and the inspiration or motivation to get out of the debt trap. Debt seems to be a disgraceful and appalling topic; however, peer support seems to be a great motivator and could hold people accountable as per experts. Online forums, debt support groups, a close friend or family member could keep you on the right track to fulfill your goal of leading a debt-free life.