Managing Tricks Of Debts And Debt Consolidation Loan
There is no rocket science in managing debts and finance. All you need is a little bit of panning and self-control, especially in your spending habits. If you think deeply you will see that it is your spending habit that has led to a stressful financial situation and therefore it needs to be changed to ensure you get rid of your debts easily and quickly.
Most people who struggle with a number of debts consider taking out a debt consolidation loan is useful. Well it is true as the debt consolidation ratings suggests but this rating would have been a lot different if people were not strategic in managing their debts.
Consolidating all your existing debts into one may be a very useful way to reduce the burden of debts but only with proper knowledge and by following a strategic plan.
Knowledge about debt consolidation
Debt consolidation primarily means combining several debts that may be both of small as well as big size and make it into one.
- In addition to that, you are also allowed to take out such a loan at a much lower rate of interest combined to the interest rates of those debts that you already have.
- You will continue to make one monthly payment tone creditor for a comparatively longer period of time.
Debt consolidation is offered by different banks, national and private as well as several Non-Banking Financial corporations or NBFCs. These loans in short will provide you with debt relief as well as complete peace of mind.
Main benefits of debt consolidation loans
Taking out a debt consolidation loan means you will enjoy a lot of benefits through it.
- This means that you will not only reduce your number of debts as well as the monthly payments but at the same time you will also reduce the chances of any missed payments as you will not have to keep track of multiple loans, multiple due dates, multiple creditors and multiple monthly bills.
- There will be no delay or confusion or any chance of adding interest and penal charges that may eventually raise the amount of your debt which is a high chance should you continue with your multiple loan accounts.
- It will also save you from the drawbacks and consequences of paying just the minimum amount due every month on your bills. This ideally leads to further financial crisis and that too very soon than you can imagine.
If you thought that the list of benefits just about ends there then you should think again and read on. Apart from the above obvious benefits, taking out a debt consolidation loan has several other indirect benefits.
It will improve your credit rating as well. When you carry on paying your debts off on a regular basis and on time it will not only reduce your outstanding debts but at the same time it will result in the gradualincrease of your FICO credit score. Just make sure that before you apply for a debt consolidation loan you check your credit rating because this is an option given by the banks and NBFCs to those who have a FICO scoring.
Applying and managing a debt consolidation loan
Since the banks will check your credit score, your outstanding loan balance as well as your ability to repay the fresh loan you wish to take, there are few things that you should do before, during and most importantly after receiving the loan.
- In case you have a very low credit rating or know that you have bad payment history, it is better that you focus on repairing your credit rather than applying for the loan and summarily get rejected by the banks thereby affecting your credit even further.
- Apart from that, when you want to apply to get a debt consolidation loan you must also make sure that you firstly check on the specific amount you want to obtain from the bank. Once again your credit score will determine how much amount you will get when you apply for such a loan.
- Know about the resources that you have so that you can make the payments on time though the rate of interest charged which will eventually decide the amount that you will pay every month will once again depend on your credit score.
Apart from that, you must also do the following when you apply for a debt consolidation loan as that will eventually help you in your debt management plan. Before you apply for a debt consolidation loan make sure that you:
- Prepare a proper list of all your debts that are existing
- Look for those debts you have that are nearing the end of loan term and exempt them
- Check out for those debts that may carry a pre-closure fee and exempt them as well
- Do a proper and thorough research to find a reliable and reputable lender to obtain your debt consolidation loan
- Compare all your debts based on the rate of interest especially and pick the best ones to consolidate
- Compare all lenders and choose the best one from the list and
- Do the math.
There is no substitute for proper planning when it comes to debt and finance management. However, simple planning is not just enough to help you to get rid of the rid and enjoy the benefits of a debt consolidation loan. For this you will have to take control of your expenses and even have to make a few adjustments as and where required.
While you apply for the loan you will also have to take care of the following:
- The initiation fees
- The service fees
- The insurance charges as well as
- The processing fees.
These considerations will ensure that you provide adequate relaxation to the monthly payments that you have to make that will inevitably help you to get out of the seemingly unmanageable financial crisis that you are in at present. In short, it is up to you to keep debt consolidation as a solution for your multiple debts as it ought to be.