Quite simply put debt consolidation is where you take out one big loan to repay all your smaller loans and credit/store card debts. Combining all your repayments into one consolidated repayment can quite often reduce your monthly expenditure quite considerably. This is the main reason why most people take out a debt consolidation loan, to reduce their outgoings and give them some extra cash to spend each month. However the most important aspect of debt consolidation is the fact that so long as you destroy your credit cards and do not use them again you also have a definite date when you will be debt free.Most people do not realise that if they have a number of credit card balances of 5,000 or more, that they are paying the minimum amount to each month; it is going to take them a really long time to pay back the money and finally become free of debt. Also because your finances are stretched each month and you are unable to put any money by each month, if an emergency arises such as needing to make repairs to your car or home, the only payment option open to you is your credit card.Is Debt Consolidation Right For Me?If you have outstanding balances on several credit or store cards, and or several unsecured loans, and you are struggling to keep up with the monthly repayments, then debt consolidation could be your best option. To be eligoble for a consolidation loan you must be in employment, earning enough money to to justify the loan, they will also require a good credit history and will need to see that you have never missed a payment.How Much Should I Borrow?Before deciding how much you should borrow you need to take a close look at your finances and work out exactly how much you owe. You also need to write down a list of your monthly outgoings so you know exactly how much you are spending each month, and determine if there is anything that you do not need to spend. If you have no savings to back you up, then it might be an idea to borrow a little bit extra to keep aside in your bank account in case of an emergency arising, this way you wont have to use your cedit cards again.When you have decided on how much you need to borrow, and what you can comfortably afford to repay each month you should apply for your loan. Look at the amount you can afford to repay on the loan and opt for the shortest term you can possibly afford; Then you should destroy every single credit card in your possession, to make certain that you do not use them again.In SummaryConsolidating all you debt into one more easily manageable payment, can reduce stress and improve your financial situation. However it is important that anybody who goes through this process adopts a more organised approach to their finances, by working to a budget. by achieving this you will be able to enjoy the full benefits that come with a debt consolidation loan, by not doing so may put you into financial ruin.
