When you purchased your new furniture to fit out your new home, your income could support the monthly payment. Then, there was that little trip to the Caribbean last summer that really did some damage to your credit card. Compound that with the fact that in the last couple of months, you had to make repairs to your home and that has maxed out not one card but four.
You have a monthly mortgage that is reasonable, but the interest rates on those cards are beginning to climb and things begin to get worrying. Every month, you pay a couple of hundred dollars in interest to keep your card’s current, and Ramen noodle breakfasts, lunches, and suppers are a serious reality in your future if you do not rein in this out-of-control debt. However, all is not lost, as you have a couple of options—namely the debt consolidation loan. In fact, debt consolidation loans by Latitude and other financing companies can help you save money and your credit score.
Before applying for a loan consolidation, sit down and review all of your debts to determine which ones to consolidate. A few of the considerations should include interest rates and amount of the payment. If you have a card with a good interest rate, it might not be in your interest to include it as a part of your consolidation plan.
You also want to look at all of your monthly obligations to see how you can get the best benefit from a consolidation loan. After reviewing your monthly budget, figure out which loans should be consolidated. Then, as a part of any debt consolidation program, seek counsel on some of the programs that can help you achieve debt relief.
Play With The Figures
When finished reviewing your budget and deciding on which loans to consolidate, play with the figures to determine whether this type of loan is appropriate. Sometimes, consolidating is not in your interest, especially if your new interest rate does not lower the amount of money you would pay over the life of the loan. Furthermore, paying on existing credit in the short-term can help you re-establish your credit or help you hold onto credit cards that have good rates.
Review Your Credit Score
As a part of preparing to consolidate your debts, review your credit score to determine its rating and whether a consolidation loan is even necessary. This part of consolidating loans is important because the whole point of this process is to repair any damage to your report and to provide you with some financial relief. Plus, you cannot repair a report if you have no idea of what is being reported to the credit agencies.
Financial Paradigm Shift
As a part of the consolidation process, you have to be real with yourself about your spending habits. Yes, a consolidation loan is a quick fix for a short-term situation that could turn ugly, and yes, you do eventually come out from under what seems unending debt. However, lasting financial health comes with understanding our spending habits, why we spend, and the purpose of credit. By understanding our own spending habits and spending patterns, we can better make use of money and even learn to make it work to our advantage.
Re-Establishing Your Finances
The lure of credit cards is strong, especially in a society bombarded with materialism. Like many consumers, credit ends up being a necessary evil that can make our lives miserable if not properly managed. However, debt is not the devil incarnate when we begin to think about financial fitness from a different paradigm.