Visit for latest information and tips about Online Banks & Online Bank Rates

The First Step in Debt Consolidation

Posted on May 1, 2012 | in General Finance | by

Debt ConsolidationTrying to tackle multiple kinds of debt can be frustrating. When you owe money to differ creditors, it’s difficult to manage all of your bills simultaneously, and to stay away from situations that may affect your credit score. Debt consolidation is an option, but the best strategies require some knowledge about how the ‘debt industry’ works.

Appraise Your Budget

One of the first things that most financial consultants recommend in a new plan to tackle debt consolidation is a thorough review of your household budget. You’ll need to understand each expense throughout a given month, and be able to prioritize what is discretionary and what is truly important. This is similar to looking at your finances through a ‘business lens,’ as business leaders understand that a working business must make profit by making revenue exceed expenses.

A good review of almost any budget will turn up expenses that can be decreased, or entirely deferred for a period of time. All of this will help you toward a situation where you can knock out multiple debts with a lump sum payment that fits into your budget.

Combine Existing Debts for Low-Interest Consolidated Loans

One of the other initial steps that individuals will take in debt consolidation is to identify the loans with the highest rates of interest. These are the debts that most stubbornly refuse to decrease over time. Borrowers who don’t really analyze interest rates are often frustrated because they make generous payments to the principal, but they don’t see that principal diminish quickly.

In debt consolidation, you can shop around for a lender who will give you a good interest rate on your debt. With a lower interest rate, you may find that you can pay down your debt much more over time, with the same kinds of payments that you may have made previously. That’s why working your highest-interest individual debts into a low-interest consolidated loan is such an effective way to handle debt cycles that seem to stretch out into eternity.

TAGS: , , ,

Leave a Reply