4 Tips For Successful Debt Consolidation
Debt consolidation is the process of combining several debts into a single loan at a lower interest rate. It is a good solution for high-interest debts like credit cards. However, it’s the beginning of a lengthy process. Here are four tips to ensure it works.
Stop Using Your Cards
Not using your credit cards is a crucial step as you repay your debt after consolidation. Experts say taking extreme measures, such as freezing your credit card or locking them away, is effective in helping you reduce your usage of credit cards.
Taking such measures doesn’t mean you don’t use your cards at all because this may lead to your account being flagged off as inactive, and your credit getting damaged. Consider charging a nominal amount on the card every few months, and repay it in full and on time.
Chalk Out A Realistic Budget
A basic budget allocates funds for debt payments, contributions to retirement savings, and an emergency fund. However, the ideal way to go about chalking out a budget after consolidating debt is to avoid including debt in your budget. Instead, take into account infrequent expenses, such as car registration fees and those that occur during the holidays.
Also, a realistic budget must include money you can use to purchase items you value and love.
Don’t Be Afraid To Enlist Support
Peer support can be a powerful tool in helping you stay motivated and accountable. You can reach out to a close family member, online forums, or debt support groups to stay on track and move closer to reaching your goal. Online lenders, such as Prosper and Payoff, offer personalized recommendations and apps to help borrowers stay motivated.
Compare Consolidation Products
Balance transfer cards allow you to shift your debts from other cards. They don’t charge you interest for a limited time (the best ones offer 15-21 months). After the specified period, you are charged a double-digit interest rate. Most of these cards require you to pay a balance transfer card fee. A high income is important for getting qualified.
Listing out the total of all your potential sources of income, including the amount in your savings account and 401(k) account, on your application could increase your chances of being granted a balance transfer card.
Follow these tips to make the best of consolidating your debt!
