If you are drowning in debt and want to get out as quickly as possible, you should consider consolidating it. This is a method that has worked well for many people, and there is a good chance that it can for you as well. There are quite a few things that you will need to know before going ahead and making a choice though. This is definitely not something that you want to enter into lightly. In this article we will go over some of the basic facts of debt consolidation, which can be very beneficial for you.
How it Works
Debt consolidation involves getting a loan for the full amount of whatever you owe. The lender essentially helps you to pay off your creditors, but you have to pay them back. This can be beneficial if you are able to get a lower interest rate from the new lender. You will still have to pay back the same principal amount, but with less interest.
Who Should Consider Debt Consolidation?
Pretty much anyone who owes upwards of £1,500 should consider debt consolidation as a possible option. This is not a method that is good for people who just owe a couple hundred pounds in credit card debt. It is important to keep this in mind before moving forward. You don’t want to waste your time on something that isn’t really going to help you.
Make a List of All Your Debts
The first thing you want to do is to make a list of all your creditors and how much you owe each one. It is crucial that you get organized so that you will have a full accounting of your debt. Make sure that this list is very detailed and completely accurate, because otherwise it won’t do you much good.
Look at Your Credit
The current state of your credit will play a big role in what kind of rate you can get when consolidating your debt. If you have a pretty low score, you should probably take some time to improve it before pursuing this option. The fact is that debt consolidation doesn’t really work if you can’t get a better rate than what you already have.
Keep in mind that getting one of these loans can actually improve your credit, but only if you pay it back on time. If your credit isn’t in very good shape right now, this is something to consider.
Contact Your Creditors First
Before you try to get a debt consolidation loan, you should first try to contact your creditors. There is a chance that they might be willing to reduce your current rate. This could help you out a lot with paying off the money you owe faster. While you shouldn’t expect to get a better rate, it is a possibility. This will only cost you a few minutes of your time, so it is definitely worth trying.
Borrow from a Private Lender
The lender you choose to get your debt consolidation loan from will matter a lot. This is why you will need to research your options before making a decision. Private online-based lenders have become incredibly popular with people who want to consolidate their debt. Part of the reason for this is because many of them approve individuals with bad credit. You’ll still want to shop around so you can get the best possible rate, but it’s an option to think about. These lenders have websites that you can apply on, and it only takes a few minutes of your time.
Be Careful About the Loan Terms
Before you finalize your debt consolidation loan, you need to take a very close look at the terms. You don’t want to get any sort of loan without knowing exactly what you are getting yourself into. These terms will ultimately determine whether or not it is worth it. You should go over the contract carefully before deciding whether or not to sign it. This document will have the due date of the loan, the interest rate, and any fees you will need to pay. The fees vary depending on the lender, so you need to find out what they are going to be.
While debt consolidation might not be the right option for everyone, it is something that can be of great help. You will need to make a point of exploring this option in depth before making a decision. The more time you take to examine it from every angle, the less likely you will be to have any regrets later on. Consolidating all of your debts into one monthly payment will make it a lot more manageable. You will also no longer have to worry about creditors constantly calling and harassing you.