If you have debt that you need to pay off, such as credit cards or loans, one alternative to help you pay down the debt at a faster rate is to use a personal loan to consolidate your debt. However, debt consolidation is not a guaranteed process. Making the wrong moves can even cost you more money in the long run. Check out a few tips to make debt consolidation work for you.
1. Consider Closing or Restricting Access to Your Credit Cards or Credit Lines
One of the mistake that many individuals make when they consolidate their debt is that they continue using their credit cards or credit lines. If you do this after you use your personal loan to pay them off, you will then have the personal loan payment plus payments on your credit cards and credit lines. Some individuals are disciplined enough to just stop using their available credit, but many are not.
You can close the credit cards that you pay off to ensure that you do not start using them again. However, this can hurt your credit score because it decreases your available credit and removes the card's history from your credit report.
Another solution is to make it inconvenient to use the cards. Cut the cards up; if you want to start using them again, you will have to call the issuer and request new cards. You can also put them in your safe deposit box or another spot that you can't readily access.
2. Make Sure You Can Afford the Personal Loan Payment
When applying for a personal loan, you will likely get to choose from different loan terms. Even though it may be tempting to go with a shorter term so that you can pay off your debt as quickly as possible, you need to make sure that the personal loan payment fits your budget. If you don't, you are setting your debt consolidation up for failure. When your budget is unrealistically tight, this increases the likelihood that you will turn to your credit cards to cover your expenses.
Instead, sit down and create a realistic budget to see how much you can really afford to pay each month. Make sure to accurately estimate variable expenses (such as your grocery bills), and remember to include irregular expenses (such as car maintenance).
3. Get Your Credit Ready
A lower interest rate on your personal loan means that it will cost you less money to pay your debt off. Get the best interest rate possible by preparing your credit before you apply for the loan. Check that your credit report is accurate, and dispute any inaccuracies. Make your loan payments on time. If your credit feels like it falls short, you can apply for the personal loan with a credit-worthy cosigner.
Hello, my name is Sigmond Jenner. Welcome. I am here to talk to you all about acquiring personal loans for emergency expenses. Although everyone should have an emergency fund in a savings account, there are many barriers to achieving that goal. In the meantime, you can look into acquiring a loan to cover emergency expenses that may come up. You should be prepared ahead of time, so you can act fast when unexpected financial expenses arise. I will provide information you can use to prepare yourself for this process. Please come back again anytime to learn more about acquiring loans as needed.