Opting for a debt consolidation is a drastic financial decision and it must not be taken lightly. You must always consider some alternatives before opting for your debt consolidation loan. You must somehow manage to figure out exactly how you would be making timely payments and ensuring that you have access to the best possible interest rates. Here are some of the things you must do before taking the debt consolidation route.
Consider the Available Alternatives
By considering a number of alternatives to debt consolidation, you might be able to save money by paying less interest. Some credit cards offer 0% APR on balance transfers, which means you can shift existing balances onto the new card. You can then make the payments to reduce this balance without any interest in the introductory period. Some local credit unions also have interest rates which are considerably lower.
Set Up a Budget and Repayment Plan
Once you’re set up with a loan arrangement, you need to make all payments in the new payment structure on time. This is all the more pertinent if you haven’t been keeping up with the minimum payments on previous balances. You should take the time to create a budget and a plan to repay each of these loans while being able to hold on to certain parts of your lifestyle. You should sit down with a consultant if needed.
You should make a list of all your current debts across credit cards, different kinds of loans, and other accounts. Keep track of your monthly expenses and identify areas which you can cut back on or sacrifice entirely. Also, take note of a realistic estimate of how much you can spend towards repayment of your debts each month. Once this is sorted out, you can then make proper allocations and also know what kind of terms you want on your loan.
Hunt Down the Best Quote
Thorough research is very important. Check out as many lenders as you can. Collect brochures, see their websites and make visits or calls if necessary. This is the best way to ensure that you are getting the very best terms and interest rates that the market can offer. A number of lenders offer you rate quotes based on a soft credit inquiry. These are not reflected on your credit report, but hard inquiries conducted in the final approval process are.
Keep Scams at Bay
It is always best to rely on trusted, reputed, and well-established lenders. You may seek assistance for all your debt solutions. While choosing a good debt consolidation loan, you must keep an eye out for warning signs such as upfront payments, guaranteed approvals, aggressive marketing & sales representatives, and even quick-fix promises. Keep in mind that no lender should be charging you any upfront fees until you get your loan. You should refrain from sending any money using a prepaid card or via a wire transfer.
You must chalk out a fruitful plan to stay away from debts in future. An effective debt consolidation loan could be wiping the slate completely clean and would be allowing you to make a brand new beginning with zero balances on your credit cards and also, all credit commitments.