Reports on US consumer debt indicate that we are now at a record high $ 2.7 trillion dollars in debt as a country, which means each American today owes $ 8,100 on average. While the economy is said to be improving, many unknowns can through recovery off course. In fact, TotallyMoney predicts that given the current economic scenario, this record level of debt is still expected to rise within the coming years.
When a person is saddled with multiple loans and piling up credit card bills, most financial gurus advise looking into debt consolidation to help manage your finances and save your credit score. Though there are a number of viable loans for bad credit customers, at the end of the day, racking up more loans will have lasting negative effects on your credit standing. Debt consolidation is a process by which all of your debts are lumped together under one lender. Though it is a highly effective tool to pay off your loans, there are several factors you need to consider to ensure a successful consolidation.
Manage Your Spending
One of the easiest ways for your debt to balloon out of proportion is by spending beyond what you can afford. It is easy for anyone to fall prey to spending addiction, and when you start to use your money heedlessly, not even debt consolidation can save you. The key to making consolidating your debts work for you is to disciplining yourself and cut back on your expenses while you are paying off your loan.
Evaluate Your Total Loan
Even before applying for a consolidation, you need to take stock of how much you owe and from here decide on which debt consolidation provider meets your needs. In choosing your consolidation lender, experts advise looking into several factors such as the total amount of your existing loan, pay back duration, processing, pre-payment and penalty fees as well as their interest rates.
Do Your Own Research
Consolidating debt, though it is a highly effective financial tool, does not work for everybody. It is wise to take the time and effort to conduct your own research so that you know you are making an informed decision.
Look at Your Individual Debts
Before finally deciding on consolidating all of your loans under one lender, it is also best to look individually at your loans and understand their particular fees, costs and terms. In some instances, not all your debts are good candidates for consolidation especially if your current debt generates lower fees than your consolidated loan. This can often be the case for those with federal college loans at low rates, as well as other programs where your interest payments are below the market average.
- Advantages of Debt Consolidation Loans (debt-consolidation-2u.com)
- How Debt Consolidation Could Benefit You (debt-consolidation-2u.com)
- Tax debt: Ways in which you can pay off IRS debt (2011tax.org)