There are many reasons for taking out a debt consolidation loan, but you don’t want to simply fall back into the same habits in a few years that caused you to get into debt in the first place.
Here are a few tips to help you get the most out of your debt consolidation loan and get your finances back on track.
1. Look at your spending habits.
Debt consolidation loans can be a great tool to help you get out of debt once and for all, if you use them right.
The problem is far too many consumers simply ignore the underlying problem that got them into debt in the first place and rack up more debt even after consolidating and paying it off.
A debt consolidation loan can help you focus all your attention on one loan payment.
It can also help you lower many of your higher interest rate credit card bills and loans into a single and often lower monthly payment and interest rate.
However, the real trouble happens if you don’t address the real reason you got into debt.
Do you have a spending problem? Are you trying to keep up with the Joneses? Do you spend money out of boredom? Do you not have or follow a monthly written budget?
You don’t want to focus all your energy and payment on a single debt consolidation loan, only to add to your debt later by not addressing the bigger picture as to why you are overspending.
“A debt consolidation loan can be a powerful
strategy to help you pay off debt.”
2. Don’t shuffle money around.
There is a danger with debt consolidation loans that you are simply playing a shell game with your debts.
With a consolidation loan, you may be moving your debts from one pile to another without actually making a dent in paying them off.
You may feel better that you are paying off multiple smaller loans, but you may have a larger problem with a new larger loan and other small loans if you don’t change your financial habits.
You cannot play a shell game with your finances. You must commit to becoming debt-free and to stop using credit cards if you want a debt consolidation loan to work for you.
3. Throw more money at the consolidation loan.
Now that you have only one debt payment to make, you can focus solely on paying it off without having to worry about a number of other debts, balances, due dates, multiple interest rates and the like.
You should make a conscious effort to throw as much money at your consolidation loan as possible.
Do you want to be debt-free? Then you should make additional principle payments on your debt consolidation loan with any extra disposable income.
You can reduce not only the total length of your loan, but also the total amount of interest you will pay on your debt if you make additional principle payments.
A debt consolidation loan can be a powerful strategy to help you pay off your credit card and other consumer debt, but you must be disciplined and use it correctly.
You don’t want to find yourself simply falling back into old habits and racking up your debt a few years later.
Have you ever taken out a debt consolidation loan? Did it work for you to focus only on one debt to pay off? Did you find yourself back in debt a few years later? I’d love to hear your thoughts about your experiences.
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