The too much loan will make yourself dizzy. You will find it hard to determine which payment should be taken into priority.
Fortunately, there are some ways to make the payments easier to control, one of them is a debt consolidation.
What is meant by debt consolidation and what should you prepare before consolidating your debts? We will provide an explanation for that
What is debt consolidation?
Debt consolidation is a combination of several smaller loans into one larger loan. It has a purpose to allow people with multiple debts to combine the high-interest loans they have into one larger loan which offers much lower interest rate.
In other words, the more loans, the lower the interest rate charged will be. Debt consolidation is useful as a saving when it comes to paying interest.
In addition, consolidating all your debts into a single debt will make it easier for you to manage transactions through one monthly payment.
Types of Debt Consolidation Programs
There are two types of debt consolidation. The first one uses collateral and the other one does not. Both have their own advantages and disadvantages.
All can be obtained in accordance with the terms and conditions provided by non-bank financing institutions.
Consolidation with Collateral
As the name suggests, this type of debt consolidation requires you to give collateral. Usually, you can use property – for example, is residential property – as the pledge in most cases.
In several other cases, the pledge given can be a car.
This type of debt consolidation is considered to be more suitable for those who do not have assets.
This type of debt consolidation without collateral is then divided into two again, namely the card cutter and card cutter plus.
The former allows you to use a credit card with a certain minimum amount of balance.
As the name suggests, you do not need to use any collateral. All you need to do is just registering in the Card Cutter program, and several types of debt will be automatically replaced by one new debt.
Meanwhile, the later allows you to do the same with the former. The only difference is in the negotiation process before the debt is consolidated.
His negotiation aims to allow you to get a discount. It actually will cause your debt feels lighter and let you pay it off more easily.
The procedures that you should know
There are something that you should know before doing debt consolidation. The things are:
1. Creating a healthy financial lifestyle
You should live a healthier financial lifestyle. It means that you have to know exactly the quantity of all loans of monthly payments, the time allotment of the loan to end.
You can record all loans that must be repaid with their respective details. It will make it easier for you to manage transactions in monthly payments while determining whether it needs to be consolidated or not.
2. Comparing the total debt with the income you have
After recording all loans and your income, you will be able to see the result. It will let you know what percentage of income should be used to pay off debt.
If you still have enough funds to support your needs in a month, it means that it will be possible for you to consolidate the debt.
3. Comparing Banks
The next thing you need to do is to approach different banks and compare each of the interest rates and products offered and also the terms and conditions they require.
Use a comparison site to speed up this process. Recall your goal to consolidate is to get a lower interest rate.
Do not forget to consider other factors such as the convenience and flexibility of loan payments.
However, the is a thing that you should always remember. Before you direct all personal loans into debt consolidation, you have to realize that this method is not the only solution to your debt.
Consolidation is like incorporating all your debts into one container. Although your current monthly payment under a debt consolidation loan seems smaller, the loan period becomes longer, which also means that you may pay interest even higher than before in total.
Steps for Submitting Debt Consolidation
1. Calculate the Total Debt
Before finally deciding to join a debt consolidation you should first consider the total debt that you have.
The quantity of your final debt will be taken into consideration whether or not you will be able to keep the savings and whether or not it is possible for you to pay your current debts off.
In addition, you also need to re-check the assets that you have currently. They can be a house, car, or other valuable assets that will help you join the debt consolidation program.
Next, you should look for the information about some providers of debt consolidation program.
After you calculate the quantity of your debt in total, you can start searching the suitable program that offers good service reputation.
2. Make sure that you meet the requirements
In a debt consolidation program, usually, you will be offered several requirements that you should fulfill.
In this case, you should recheck whether or not your assets meet all of the requirements. What you need to do is submit the requirement to the chosen borrower.
The requirements can be varied, for example, the client should live at least a couple of years in the same place, working in the same place for a certain period of time, having a certain number of children, being married, and many other requirements.
Make sure you can handle the loan interest
When you decide to take a part in this program, one thing that you should be aware of is your ability to handle the interest that you should pay each month.
This monthly installment should be lower than the current interest that you have to pay.
Those are the things that you need to do before deciding to join the debt consolidation system.
There are many things you need to reconsider, or else, you will only put another problem with the current problem that you have.