Debt Consolidation Guide

Debt Consolidation
Is debt consolidation the way to go? 
What are the implications?

Having been bombarded with offers of personal loans, personal credit etc, etc for the last few years, many of us have taken advantage of so called “cheap money”, and perhaps borrowed a little more than we should have. There is little wonder that some of us now need to have a rethink about the way we organize our finances

One way to manage our debts is to take out a loan to pay off your existing debts. These could include:

• A secured loan
• An unsecured loan
• Credit Card debts
• Re-mortgage

If you consolidate all of your existing loans into one, you may find that not only do your monthly payments reduce, but you can plan your finances more effectively because you only have one payment to make every month. Be aware though, that if you extend the repayment period for the consolidating loan, although the monthly repayments may be lower, you will most likely end up paying more in the long run, so make sure you read and understand the terms and conditions of the contract, and pay special attention to the fine print.

Another point to consider when thinking about taking out a consolidation loan is whether or not to use a secured loan as a means to consolidate your existing loans. As the name suggests, a secured loan has security attached to it, YOUR HOME! So think carefully about taking out a secured loan, as if you do not honour the repayment requirements, your home could be repossessed and sold to pay off your outstanding debt.

Nearly everyone has their own personal set of financial problems, so you will need to evaluate if consolidating all your existing debts into one is right for you.
One of the first things to do is dump the credit cards (remembering to cut them up first!).
After you have recovered from that, the next thing to do is take stock of how much you owe and to who. Make a list putting the most immediate debts at the top. You must continue to make the monthly payments and not default on them, that will only make things much worse. If you do decide to take a consolidation loan, I would suggest you still get rid of your credit cards (what you haven’t got can’t hurt you). To sort out your debt management, you will need discipline.

Don’t be fooled by the fact that you have more money at the end of the month by arranging a consolidation loan to turn all your existing loans into one. You still have the same amount of debt that you had before, and if you have borrowed more money than you needed to pay off your existing debts, you could even be in a worse position.
Think long and hard about borrowing more money to solve your debt problem, it is not a decision to be taken lightly.

Now your flexible friend (credit card) has most likely become your flexible enemy, every one starts out with the best intentions of paying off the balance every month, but as with all resolutions and good intentions, things go wrong and plans change.

Most people, who get themselves into debt, do so by using credit cards to maintain a lifestyle they cannot afford. Although, consolidating your debts will solve any immediate problems, it will not solve the underlying cause of your debt problem. Make sure you identify the source of your debt problems and deal with it, and if the source are credit cards, then CUT THEM UP (you know it makes sense).