So many people and families get stuck in the cycle of debt. The problem is that once you start with lending you are spending money that you don’t have and you have to pay it back, along with huge interest fees and other finance charges.
Perhaps you are taking out cash loans, maxing out your credit cards and/ or buying clothing and products on account. Then you find a huge portion of your salary gets allocated to paying off your debt and your available income for your living expenses becomes smaller and smaller until often eventually you do not even have enough money to cover your basic necessities.
What often happens then is that you take out another little loan or credit card to pay your monthly debt obligations, leaving you in an even tighter predicament the next month.
This is an incredibly painful and stressful place to be.
One possible solution for you is to consider taking out a bill consolidation loan.
A bill or debt consolidation loan is when you take out another loan that allows you to pay off all your debts with another loan that has different terms.
The three main benefits of applying for a bill consolidation loan are:
Lower Interest Rates
Typically a bill consolidation loan will be for a large amount to cover all your debts, but it will be at a much lower interest rate than your other debts such as credit cards which have a very high interest rate.
Lower Monthly Payments
Typically a bill consolidation has a low repayment amount, over a longer period of time. This gives you more breathing room to get back onto your feet and be able to cover all your other monthly expenses such as rent, food, fuel and other living expenses.
Payment to One Company
It is so much nicer just having one company to pay each and every month than keeping track of a number of different accounts. This can make it so much easier to plan your finances and get out of debt.
When Should you Apply for Debt Consolidation?
If you are struggling to keep your head above water and meet all your financial obligations it may just be a matter of time before you are unable to make your minimum monthly debt repayments as well as pay your monthly living expenses.
Just one little unplanned expense such as an unexpected car repair or an emergency visit to the doctor can suddenly put you in a predicament where you cannot pay your bills.
Your credit profile is now at risk and the stress can be overwhelming.
This is when a debt consolidation loan can really save the day.
Investigate the Different Types of Debt Consolidation
There are different types of debt consolidation loans which range from companies that just offer an unsecured loan for you to pay off your other loans, to home equity loans (loans borrowed against the value of your house) and credit balance transfers. to debt management companies that actually negotiate with your creditors on your behalf and also offer things like debt restructuring and debt counselling.
It is important to properly research all the options available to you and make sure you are making the right choice long term.
The Importance of Changing your Spending Habits
Yes a debt consolidation loan can certainly get you out of a tight spot and give you an opportunity to clear your debt and have more available income in the very near future. However a debt consolidation loan means that even though you will be paying a lower monthly fee you will still be paying for a long time to come. In the long run you will most likely be paying a lot more money by using a bill consolidation loan.
An additional issue is that getting a loan to save your skin helps in the immediate future, but it may just be putting a band aid on a much bigger problem. You will need to ensure that you don’t fall back into the same spending habits that got you into the debt in the first place.