You pass through the same furniture shop every day. You want that dearly to complement your living room’s space. However, you cannot spread the payments due to the existing debt trap. You juggle with payday loans, home renovation debts, rent, utility payments, subscription costs, etc. All of this makes it basically unbelievable for you to pay another loan.
If searching for the best way to get rid of the existing pending payments, debt consolidation could help. It is the strategy to merge different payments into a single monthly instalment. You might be thinking- “Is it possible?” Well, yes, it is. Here is how you can get out of all debt with a consolidation.
What do you mean by debt consolidation?
Debt consolidation involves combining and consolidating debts into a single monthly payment. You can merge any payment, like credit card, rent, car loans, stationery loans, student finance, etc. Here, the borrower gets a new loan with fresh terms and costs.
The payment schedule aligns with the person’s affordability and credit score. The arrangement helps you save money on the total amount, interest, and monthly payments. Yes, you can be in for a whopping savings.
A loan for consolidation can be secured or unsecured. It depends on the need and affordability. Choose the one according to the risk assessment and the ultimate life goal. You can budget for the payments by preferring a fixed rather than an irregular rate loan. The interest generally stays competitive on this loan. Therefore, always compare and improve your finances before seeking one.
7 Steps to consolidate debts for better financial management
If you deal with 7-8 payments monthly and need relief, the technique may work for you. Moreover, what could be better than paying less than what you owe on the debts? Here are some steps to follow to achieve financial independence:
Step 1- Analyse and list your debts
The basic steps to consolidate debts are knowing how much you owe in total. Create a list of the debts, including the payable amount. Include- outstanding balance, interest, penalty and late payment fee (if any). Generally, creditors impose one if you miss, default, or pay the dues late.
Calculating the number and putting it against the monthly expenses helps. You convey to consider how much you can afford in that case.
Step 2- Identify the best way to consolidate debts
Yes, you can consolidate the dues in multiple ways. For example, you can pay your pending rent in the following ways:
- Taking an affordable debt consolidation loan with easy payments
- Considering a balance transfer card. It is usually ideal for transferring credit card balances into a single credit card.
- Secured loans. You can provide an asset as collateral to get a secured loan. It helps you get Low interest rates and a high amount. It is a perfect alternative for people with a bad credit history and multiple debts.
Step 3- Choose the right option by comparing costs
Now, you know the 3 prime ways to merge your debts. However, not every aspect works well for you. For example, if you want to consolidate credit cards, then a balance transfer could be an easy option. However, if you want low rates, our loans for debt consolidation would be supported. Similarly, not everyone can get a debt consolidation.
Individuals with low credit history and income may not qualify at all. It may require him to provide a guarantor or collateral. Evaluate the possibilities and the risks associated with each option. Accordingly, fetch the right one. Additionally, consider the following aspects before picking the best option:
- Interest rates and fees
- APR
- Loan term length and monthly repayments
- Your financial habits
- Regular monthly payments
Note- Choose the loan with a low interest rate and APR after comparing your options. Additionally, choosing a lower repayment term and high monthly payments helps save on interest costs. Make sure you can afford the repayment without affecting basic expenses.
Step 4- Apply consciously (if you prefer a debt consolidation loan)
If you decide to proceed with a loan for consolidation, analyse the criteria to get the loan approval of eligibility. You generally need to be a valid citizen with a regular and handsome income. Additionally, you must borrow an amount less than your fixed monthly expenses. Otherwise, you may struggle to qualify.
However, you may provide additional income proof (if asked). It increases your affordability, and you may get a high amount to meet your needs. Alternatively, if you lack a good credit history and income, seek secured loans. Provide a verified and self-owned asset as collateral. It should be valued more than the amount required.
Check the information asked and provide only that much and “APPLY”. It reduces the chances of facing loan rejection.
Step 5- Provide Affordability and other financial proofs
Once you apply, you get a no-obligation quote from the loan company. Identify and analyse the terms that you may get. It is just an approximate quote that one provides based on your basic information. You can exit it if you don’t see the terms apt..
This check does not impact your credit score. Alternatively, provide the affordability and other proofs that a loan provider asks for. It helps the person analyse their actual affordability according to their finances, income, credit score and debts.
You can provide income proof like- salary, pension, part-time, and self-employed tax assessments. All these things will help you to get loans for bad credit at affordable rates.
Step 6- Choose the repayment and monthly instalments
If you meet the eligibility and affordability criteria, the loan company provides a final quote. You can suggest the repayment tenure and monthly instalments according to your comfort. It is the perks of dealing with a responsible loan provider like 24fundsflow. After providing your confirmation, you get the funds in the account within 24 hours.
Step 7- Pay the dues to get debt-free
Lastly, you must repay the dues in instalments according to the loan agreement. You can also set direct debits for easy payment management. It helps you repay the dues automatically without setting the alerts. It helps you remain on top of the loan payments. However, if you struggle to pay, connect with the creditor quickly.
Bottom line
Consolidating debts grants you more flexibility in your finances. It helps you achieve other life goals without regretting past credit mistakes. Identify the right way to consolidate debts by analysing the budget, interest rates and payment terms. Next, check whether debt consolidation lowers the overall payable amount. Proceed only if it helps you save some money.
