subject: Start Saving Money – Try Debt Consolidation for Those Badly Structured Debts [print this page] Start Saving Money Try Debt Consolidation for Those Badly Structured Debts
Debt consolidation is not for everyone but it can be a lifesaver if you are fiscally responsible but just have high interest debt. It is also an option when you have enough disposable income to pay creditors but are faced with badly structured debt. The loan required for consolidating your unsecured debt would require collateral such as your home or other property with equity in it.
Financial Complacency Cannot Factor In
Lumping all your debt into one loan can be a smart move but you cannot become financially complacent about it. You will likely secure a lower interest rate and a smaller monthly payment on your debt but the flipside is that the payment schedule will be longer. The extra money found in your budget each month should be saved for financial emergencies but all too often, people in this situation end up spending the money on the very luxuries that got them into debt in the first place. It is important that you be aware of this trap and not fall into it.
Keep in mind that with debt consolidation, your home or other equitable property may be in jeopardy if you are late with payments or default on the loan. For this reason, the advice of the debt counsellor who helped you set up the consolidation is invaluable. Listen to their evaluation of your budget and suggestions about how to lower your monthly bills so that you can set up a workable plan to pay your creditors and then follow their advice. Paying off what you owe should be the most important thing in your financial life.
The Advantages
Now that you are aware of the seriousness of combining all your debt into a lower interest loan, you should know of the advantages as well. The most obvious advantage is paying off your creditors and realising what a relief it is not to cringe when the phone rings or picking up the mail to avoid the financial harassment. The stress release can be enormous.
Cleaning up your credit report is another financial advantage when you consolidate. As long as you pay your loan faithfully, you can rebuild your credit. The pay-off is the ability to obtain future loans at a lower interest rate for important financial issues like purchasing another home or vehicle or even paying for a higher-level education at the university.
Remember, debt consolidation is not for everyone. Your future depends on the financial decisions you make today. Meet with a counsellor and seek their advice. Understand all of your options before seeking a loan to combine all the money you owe into one payment.
