When your debt load becomes too much to bear, debt consolidation is a good way to get back on track. On the other hand, as with any debt management tool, you need to stay focused on your goal. When it comes time for debt consolidation, preventing you from making the same financial mistakes must be your main goal. Repeating the same spending habits will only lead to more debt.
The good news is that debt relief is achievable through debt consolidation. You will transfer or refund all the high interest on your credit cards, student loan or other debts with a lower interest personal loan. Then you will be able to repay this single loan instead of several different accounts.
Does debt consolidation loan help?
Finding the right debt consolidation loan is the first step to take, find out here now. Doing business with a lender who understands your situation can take away stress from your debts. Find a lender for debt consolidation to your taste for a debt-free life.
The road to success
Most unsecured personal loans have a maturity, this can be any time period but usually, it’s a 3 or 5-year contract. This means that you will have a fixed period of time to get back on track. While the journey to debt relief is different for everyone, there are still some common points for all that you should meet at some point. Here is a general overview to stay on course with your debt consolidation.
Once you have been approved for a debt consolidation loan and those with the highest interest rates are consolidated, it’s time to focus on no longer having debt. The first month can be difficult, as you will have to change your spending habits and learn to live without your credit cards. If you want your debt consolidation to be successful, you will have to prevent yourself from accumulating more debt.
You may receive as advice to close all your credit accounts or any useless account, but while this may seem like a good idea, it is best not to close a credit account. The length of time your credit account is open is an important factor in calculating your credit rating. Thus, if you close all the accounts you have for several years, your credit rating will be greatly affected.
Unfortunately, if you know that you will not be able to use a credit card, you should close your accounts even if it will affect your rating negatively. In the end, this is a personal decision that only you can make.
After 6 months, you should (hopefully) begin to see changes in your finances. You will probably have more room in your budget and the stress of managing multiple credit accounts will surely have dissipated. It is at this time that you should start to see your savings:
- Open a savings account if this is not already the case
- See your budget if there is no money you could transfer to your savings monthly
- Organize an automatic transfer so you do not have to think about it
Putting money aside will provide you with depreciation in the event of a personal or financial emergency.
After 1 year of responsible spending and debt repayment, you surely notice a huge difference in how you view debt and approach money in general. It’s wonderful, it means that not only are you on the right track to no longer having debts but you manage your finances much more positively.
The first year’s stage is a highlight, where you will surely want to congratulate yourself. We believe rewards are beneficial, responsibly. There is no reason not to spend some of your money so badly earned, just do not add a large amount to your credit card if you will not be able to pay it back right away. Remember that one purchase could lead you to several others and you do not want to go back.
After three years, the end of your repayment journey is probably insight. You might consider paying off your debt consolidation loan faster, especially if you kept pace with your savings. Before doing anything, you need to make sure that your debt consolidation loan does not come with a penalty or prepayment fee. Increasing your payments, even by a small amount, will allow you to no longer have debt faster.
5 years later, you have definitely repaid your debts. This is the period when you can re-examine your finances, your budget and find a way to avoid long-term debt. After 5 years of hard work, you do not want to find yourself in the same situation as it was five years ago.