Debt consolidation is one of the best repayment programs which can help you manage multiple payments in your budget. One reason why this is very timely is because Americans are starting to fall in love with credit all over again. According to USAToday.com, the average credit card debt for consumers who carry a balance on their card is alarmingly over $16,000.
That is not a small amount to manage and it will definitely be a heavy burden on anyone’s shoulders. And this is just credit card debt we are talking about. There are mortgage loans that would dwarf whatever card debt you could have. Then there are auto loans that pretty much takes a big chunk out of your budget as well.
You also have student loans that seem to get bigger and bigger every year. Add all these and it makes debt consolidation a great alternative in repaying back debts. There are a number of consolidation benefits that would work wonders for your finances. Once you are in the program, your next focus needs to be repayment and nothing else.
However, there are a lot of people who seems to become complacent thinking that getting into the repayment program is all they have to work on. They then start to take this mentality that leads them into making one wrong decision after the other. The next thing they know, they are back to where they were before. The only difference is, they now have a bigger debt to worry about. Here are a few things to keep in mind when using debt consolidation to be able to make the most of the repayment program.
Do not add on to your debt amount
One of the most important things to remember when you are using consolidating debt is to manage your borrowing tendencies. You are there for a reason which is too much debt accounts. As you are able to combine all of those into a single account, the last thing you need is to add on to that debt payment. Not only does this makes things more complicated but it also puts your repayment program at risk.
What happens is as you add more debt, you will soon feel the struggle to meet your old payments and the new ones. What this could mean is that you start to miss payments, transfer one loan to another which will only increase the amount. Or even stop paying all of them altogether because you simply cannot keep up.
If you opted for an unsecured debt consolidation loan through a credit card transfer or a personal loan, the interest payment is your main concern. This will definitely start to manifest in your succeeding payment amounts as it increases with every statement that comes in. Debt consolidation through secured loans could be a little more difficult. This is because missing payments could prompt creditors to seize up the asset used as a collateral to recoup their losses.
Stick to your repayment schedule
One of the debt management tips you need to remember as well when you are paying for a consolidated loan is to stick to your payments. You have fewer reasons to overlook your payment dates because you are already working on a condensed version of your financial obligations. If you used credit card debt consolidation, imagine how it was before and how manageable it is now.
One of the reasons you might forget your payment is being over too confident with the program. As effective as it is, it still requires an effort from you. You still need to send out the payments to your consolidated loan. Even if you enrolled it in an automatic debit program with a lender, you still have to ensure that the nominated account can cover the monthly payments.
Just because you were able to combine your payments doesn’t mean you can take it easy. In fact, the more you need to be on top of your payments. It might look a lot easier than it was before when you had to juggle several payments. However, it does not mean that you can sit back, relax and not prioritize your payment obligations.
Adjust your household budget with debt consolidation payments
As soon as you consolidate your debts, you need to adjust your household budget to reflect that changes in your payment schedule. In fact, your budget should be the main consideration when consolidating your loans. The problem is that according to Time.com, a recent survey showed that people’s idea of a budget is simply scrawling numbers on paper where ever some are just content with a mental budget.
Once you enter your payments in debt consolidation, you have to reflect that in your budget if you have one. If you don’t then it is high time you put one together. It will help you keep track of your payments as well as make sure that your income is able to cover your expenses. The moment your income starts to have a hard time meeting your expenses, you have to make adjustments so you do not end back in debt.
Do not forget other financial obligations
As you consolidate your debt, it might be tough to include all your financial obligations under one account. Although that is the main idea, there will be instances where you can only combine most of your debt payments. There will be some payments that will be left out of the consolidation loan. It is important that you keep track of these payments as well.
If you only consolidated your credit cards and left everything as is, you need to make sure that you not only oversee the new payment but the others as well. Take control of your mortgage payment, your car loan, and even student loans if you have them. They all have to be
Make an honest assessment of your financial spending
The fact that you needed to consider debt consolidation means that you are struggling with some areas in your finances. After you get into the repayment program to put some sense of order in your budget, you need to start making an honest to goodness assessment of your financial skills. Only then would you come across traits and habits that you need to correct to be able to manage your finances better.
Change for the better
Debt consolidation can help you get your payments in order. However, you need to remember that it is treating the symptom and not really the problem. You are able to combine your payments under one account giving you a better shot at sticking to your payments. Consolidation can also lower down your monthly payment giving your budget enough breathing room to move funds around.
However, if you still keep to your spending ways which brought you to your need to consolidate your debt, you would soon find yourself in the same old situation of piling debt one after the other.
Debt consolidation is a great way to get your financial house in order. However, it should not be the end goal but rather a tool you will use to further improve your finances. Once you are using the program, you need to make sure that you keep your eyes on your payment and not to add more to it.