Explore Some Effective Preparatory Steps towards Consolidating Your Debts

Debt consolidation is supposed to be a debt solution which would be letting you integrate all your existing debts into one single payment plan. This is a simplified way of paying back your debts. Instead of continuously monitoring multiple debts and ensuring that the monthly payments are made on time and keeping track of the different loan due dates at obviously, different times during the month, you could now consolidate all these into one larger debt consolidation loan.

In this context, you must know that no matter whatever steps you take for getting rid of your debts, it is mandatory to create a budget, as the first step toward freedom from debts. The main reason why money disappears every month for some people is that they do not make a budget or stick to it. As per https://www.investopedia.com, a budget compels you to chalk out your precise objectives, save your money, monitor your progress, and translate your dreams into a reality.

There are many ways you could consider consolidating your debts. You may consider transferring balance into a fresh new credit card which offers a very low or 0% interest rate. You could alternatively, borrow a personal loan for paying off your existing multiple debts and you are then left with one single big larger loan. Moreover, you have the choice of contacting a qualified credit counselor who could help you in negotiating your debt payments. You may browse through debt settlement feedback to make the right decision.

Once you have determined debt consolidation as the right debt relief method for you; there are many critical steps you must take that would prove truly beneficial to you. Let us explore the different steps for consolidating your debts.

Examine Your Credit Report & Determine Your Credit Score

You could acquire your credit report from three reliable and reputed credit reporting agencies completely free once every year at AnnualCreditReport.com. It is a wise decision to examine your credit report so that you could identify any errors or negative terms in your credit report as these could lead to your debt consolidation loan request getting declined. If you scrutinize your credit report, you would identify the strong factors but you would also come across some errors or certain weaknesses that require some work. You could determine if your credit score is excellent, good, or poor.

Make a List of All Your Debts

Create a list comprising all the loans you owe and the ones you are thinking of consolidating. You must include the monthly payments and interest rates. Once the list is done, you could identify the most critical debts for consolidation. You need to decide whether you wish to pay off the loans with higher interests first or the ones with relatively lower interest. Accordingly, choose all the debts you wish to consolidate.

Research Available Debt Consolidation Options

You could consider consolidating with a loan from a credit union or local bank or even a reliable online lender who is known to offer personal loans or even by considering balance transfer from a credit card with a high interest rate to a credit card with a relatively lower interest rate. While choosing an online lender, you must be sure that you are dealing with genuine people or reputable lenders and not scammers who are looking for consumer information for using it fraudulently. Before you put in your application for loan determine if your lender could be providing you with some information regarding its specific credit requirements. Some lenders, for instance, would be having a minimum credit score requirement while there are some other lenders who would not be extending credit to borrowers with credit reports showing bankruptcies.

Apply For a Debt Consolidation Loan

Once you have shortlisted the agencies from where you would like to take a debt consolidation loan and understood their individual lending requirements, you need to put in your application for debt consolidation loan. In a majority of the instances, you would be getting a response almost immediately. Suppose your loan request has been accepted, you need to proceed to the next step.

Suppose your debt consolidation loan request has been declined, you must understand precisely why your loan request was rejected. If you think that the reasons are not applicable in your case, you must call up the concerned lender and request him to reconsider your loan request clarifying your stance. If your loan request was declined because of your existing debts, you could consider explaining that you are taking out this new loan for consolidating your multiple debts. You must try your best to convince the lender.

Despite requesting the lender if you fail to get a loan approval, it is best to switch to another lender. However, if your loan request is again declined the second time, you may consider getting in touch with a professional credit counseling agency that would be paying off all your creditors involved. Technically, this may not be a consolidation loan but it may feel like one.

Consolidate Your Debts

Once your debt consolidation loan request has been approved, you may use that big loan for paying off all your existing debts. In case you have not managed to get a credit line that is big enough for consolidating all your existing debts, you may concentrate on paying off the loans or balances with higher interest rates first.

Pay off the New Loan ASAP

If you consider adding a small amount to your existing monthly payments, you could be paying off the new loan easily and quickly with all that extra money every month. Keep aside some money every month for your new loan monthly repayment. Do not falter and do not be tempted to tap other credit lines as you have just got rid of your previous multiple debts. Your objective of debt consolidation was to get out of debts and not to get back to the vicious cycle of debts.

Conclusion

While you are trying your best to rebuild your overall financial health, you must remember to make timely loan repayments, stick strictly to budgets, and build a contingency fund by putting a fixed amount every month from your paycheck to the contingency or emergency fund to take care of your finances if anything unexpected occurs.