As everyone settles into the New Year, the thought of how to manage finances will no doubt be weighing heavily on some people’s minds. When facing multiple loans your finances can quickly get out of hand as you try to make ends meet. If you’re struggling with debts, have a look at why debt consolidation could help.
Consolidate debts with a personal loan
Having numerous lenders to pay back each month can be very stressful – requiring lots of maths and a high level of organisation to pay it all back and keep your head above water.
The best way to regain control of your finances is through debt consolidation. Consolidating your debts allows you to make one monthly payment to your lender and often the added benefit is that you end up paying a lower amount of interest. As you would expect – the better the credit rating you have, the more likely you will have better access to personal loans as you will be perceived as a low risk client.
As struggling to keep up with debt repayments may adversely affect your credit rating, it’s never too soon to consolidate debt.
Don’t consolidate without talking to your lender
Before consolidating your debts always speak with your lenders to see if anything can be done. The main reasons people consolidate their debts is to escape mounting interest rates. By speaking with your lender to see if they can help – you could be offered more manageable interest rates.
This should always be done before consolidating your debts as it can be beneficial to your credit rating if you can show that you have held and successfully managed a credit card account over an extended period.
Different types of loan have different interest rates, so one way of managing your finances is to look into the most cost-effective ways of paying for a major purchase.
For example, securing car finance for a new car will lead to more manageable repayments than using a general personal loan or credit card account to buy it. Likewise, speak to your mortgage lender about advances or special packages to help improve your property before resorting to general finance to pay for them.
Things to remember
While consolidating your debts is a good idea in most cases, you have to seriously consider your spending habits and how you acquired the debt in the first place. If you spend more than you earn you will only be giving yourself a short term solution by consolidating. In order to have a long term fix, you need to reign in your spending and budget within reason.
The main goal should be to pay off your debts as quickly and efficiently as possible. If you can clearly justify consolidation because of better interest rates or credit rating management, then set the wheels in motion. But only by combining it with a fresh approach to spending will you truly feel the benefits.