Managing debts and finance is not an easy job though you may wonder at times how your mother or wife did such a great job all these years looking at the desperate and helpless condition of your personal finance. Naturally, you will tend to take the easy way out which is to consolidate all your debts into one and have a convenient repayment plan.
Yes, you may be benefited this way but you will need to know when taking out such a loan makes sense and when it does not. For that, you will need to read the fine print because there may be a few specific types of debt consolidation products that will have terms that may not only be temporary but may also be unsuitable given your financial and debt condition.
Experts often say that people should be more mindful about a few specific things when they take out a debt consolidation loan such as:
- The fees if any
- The special perks that you may be losing and
- The fines that you may be charged with in unfavorable conditions or when you fail to make the required payments.
In addition to the above, it is also requested that you find out from the company offering such bulk loan whether it is a bank or any other sources such as nationaldebtrelief.comregarding the types of loans that they will allow you to consolidate with their funds.
In addition to that, you must make sure that you do not make the situation worse by digging a deeper hole. It is important that you know about your financial condition, examine your budget and determine whether or not you will be able to afford to make the new monthly payment comfortably. Remember, just like any other loans you will need to pay off a debt consolidation loan in full and on time or face the usual consequences.
Best loan and time
When you have a debt problem it is an obvious sign that you lack financial savvy. Therefore, to start with, you must keep a few things in mind to make your endeavor successful such as:
- You must show extra due diligence
- Admit and recognize that you are in debt and trying hard to solve the problem
- Be careful that you do not worsen the situation by taking out an amount that you cannot afford to repay with your given financial condition
- Make sure that you get the lowest interest rates possible
- Shop around and compare the offers to choose the best one and save money in the long run and
- Calculate the loan payments and sue a debt consolidation loan calculator to find out how long it will take to repay your debts.
As for the best time to take out a debt consolidation loan to make it a good and successful idea you must consider your credit score. Take out such a loan when you have a good credit score of 700 or above. This will ensure that you get a loan that has much lower rate of interest.
It is also a very good time to take out a debt consolidation loan when you are able to identify the cause of your debts creeping up and have already dealt with it. The causes may be varied such as:
- Losing a job and now having one back
- Having a bad habit of overspending but now have overcome it successfully by following a strict budget or
- You are confident that you will never go back to such a situation once you have your debts cleared.
When your conditions and situations are favorable in all respects, you will obviously have more options available while deciding to consolidate your debts at a much lower interest rate. You may decide to choose a personal loan, a home equity, or even a balance transfer card, if you qualify and the credit score will be the biggest factor to determine which option is the best.
In short, taking out a debt consolidation loan is the best idea when:
- There is a danger of falling behind your bill payments
- If the lower rate and extended time will make things easier for you and
- You know that your habits have changed and you will never default in paying this single loan.
However, taking out a debt consolidation loan can be a bad idea as well. In such a situation when you meet a certified credit counselor he or she may recommend a debt management plan as a more suitable alternative to debt consolidation. This type of plans are best for those people especially who are having significant amount of debt or those who are finding it hard to deal with the root cause of the debt.
- Most importantly, debt consolidation may not be the suitable option if you find that you are not accomplishing anything no matter how much sense of relief you get through such an approach.
- When you have credit cards that are free now and feel tempted to use it again knowing that the debt consolidation loan is still there to repay, you should not ever contemplate on taking out such a loan and instead go for a debt management plan as suggested by the credit counselor.
- A debt consolidation loan is also a very bad idea for those people who have a very poor or below average credit scores. Since the primary objective of a debt consolidation loan is to roll all your debts into one loan having a lower interest rate, you may not accomplish this if you have a loan with sky high interest loan simply due to your poor credit score.
Therefore, the best time to take you a debt consolidation loan is when you are sure and clear about your goal. It should not in any way increase your financial burden. You must be focused and sure about the end game to become debt free. In short, a debt consolidation loan must end your debt problem and not delay the inevitable.