Simple Strategies for Consolidate Bills
If you are feeling overwhelmed by mounting debt and the high cost of servicing it, debt consolidation may well be your key to freedom.
Robbing Peter to pay Paul can end up being a lifestyle when we are drowning in debt, yet simple strategies such as debt consolidation can reverse the downward spiral and turn around our lives. When people consolidate bills into loans with lower interest rates than they are paying on their various credit cards and other loans, they are usually able to reduce their overall monthly payments and free up more of their income to meet personal and family needs as well as pay down debt.
If you are looking to consolidate bills in order to improve your financial affairs, there are a some important factors you need to consider. First, when you consolidate bills it is important to look for the lowest possible interest rate and lowest fees. After all, the whole point of debt consolidation is to relieve the financial squeeze caused by multiple credit payments and help you more forward in life in a positive, proactive manner.
The first step when you consolidate bills is to be very clear about your purpose. Is your intention to remove the stranglehold of debt from your cash flow so you can improve your lifestyle? Or is it to be able to use the monthly savings to get out of debt quickly? Either way, debt consolidation is likely to put a lid on increasing debt. It is very easy to fall into the trap of using credit cards when we have insufficient money to pay our bills and buy needed items without even getting into the problem of spending on unnecessary products and services.
Home Equity Loans generally offer the lowest interest rates if you are a homeowner with enough equity to consolidate bills. However, if you know that large expenses, such as college tuition, are coming up in the near future you may be better off with a Home Equity Line of Credit. This will allow you to reduce monthly repayments because of the lower interest rate while still allowing you to organize a line of credit that can be used when necessary. Discipline is necessary in order to avoid getting overwhelmed by debt again, but if you have the commitment and discipline necessary to only use what you have to, a home equity line of credit can be a flexible way to turn around a trend toward rising debt as well as leave a margin for borrowing for important upcoming reasons.
Personal loans do not offer interest rates as low as home equity loans and lines of credit. However, they are often the loans of choice when people decide to consolidate bills. This is usually because most do not require collateral and provided you have the ability to pay and a good credit history, they are not difficult to obtain. Having said that, the interest rate on loans will increase with the perceived risk attached to the borrower. In other words, if you have had a poor credit history in the past, you may still get a loan, but the interest rate will be higher.
Although it is becoming increasingly common to consolidate bills using a low rate credit card, it is probably not a good idea to do so if your purpose is to turn around your mounting debt. A credit card can be flexible and a low rate card with reasonable annual fees will likely cost you a lot less than you are paying now if you are juggling multiple card payments. However, you know what those card companies are like! They will increase your limit and if you are like most people, you will spend up to it. Do you want to take that risk?
These are just a few options available to consolidate bills in order to restructure your finances. There are even more. Take the time to research the products available and before you commit to consolidate bills using any particular product, make sure you read the fine print of the contract.
Debt consolidation has the power to transform your life financially, but only if you consolidate bills wisely. Seeking professional advice before making a decision can save you years of pain.
Debt Counseling Tips
It was my wife who first introduced me to debt counseling and I thought it would be just another agony uncle whom I would have to deal with. However, it was not late that I was proved wrong. It was through debt counseling that I survived the deadly debts to recount its benefits.
Debt counseling is the advice offered through experts on several debt related issues. Debt counseling has a two-pronged strategy. While the advice focuses on ways to counter the current debt load, the borrower will also be informed of methods to prevent debts from originating. Thus, debt counseling plays defensive as well as a preventive role.
The defensive strategy will be employed for situations where the debt load is sufficiently large. In my case, the debt load was substantially large. My personal savings and monthly income would have lessened the burden a little. But, there were other expenses too that needed to be paid through the same limited income. By channeling my income towards debt settlement, I would only have paved way for newer debts.
Debt counseling showed the way out. Large number of people in the UK owe their freedom from debts to debt counseling. In fact, the very first lesson that I learnt from debt counseling is that I was not the only person who had debts. There were many others who have even messier finances. The statistics are really appalling. How come so many people, belonging to so rich a country as the UK, be so vulnerable to debts? However, people do incur debts. A desire to have almost every material comforts, often pushes people to spend rashly. On most occasions, the expenditure is without any consideration for the sources of payment.
However, as the pressure of the creditors mounts, the very first priority of debt counseling will be to design a way out for the debtors. Presently, there are a number of debt elimination options available in the UK, namely debt consolidation loans, debt consolidation mortgages, debt consolidation through remortgage, home equity loans and credit cards. Each option has its own set of advantages and disadvantages, and it will be really difficult to make a choice for one of these. Through debt counseling, borrowers can also get help during the product selection process.
Since I had a large debt load, the debt counselors suggested that I take up a debt consolidation loan. They did not force the product on me. This is one of the peculiarities of debt counseling. The debt counselor presents an impartial view of the various products. However, not all debt counselors adopt a similar view. Most of them will sell their products in the guise of debt advice. Borrowers need to stay clear of such advisors. As in medical sciences, second opinion is always beneficial during selection of debt settlement products. There are a large number of profit and non-profit agencies and individuals who provide genuine and professional advice. Some of these, like Independent Financial Advisors are bound by the rules laid down by the Financial Services Authority to offer genuine advice.
The preventive role of debt counseling is more of an advisory nature. The aim of this exercise will be to instill debt sense in the people; though this will prove a Herculean task, given the strange relationship of people with debts. The role may take the form of a face-to-face meeting with an individual, or a conference wherein a number of people are addressed at one time.
During these sessions, the debt counselor advises borrowers of ways to deal with debts. Debt consolidation loans and debt consolidation mortgages can at the best relieve individuals of debts for sometime. However, if the individual does not improve his spending habits, he will again have a large debt load. Through preventive debt counseling, the debt counselor aims to strike at the roots of the debt.
Some of the principal debt counseling tips include:
Do not spend more than what you earn.
If the expenditure is necessary, then a provision needs to be made for its payment.
Every individual must prepare a priority list showing the importance of each expenditure.
Try to generate newer sources of income.
If a debt has been incurred, then it must be repaid with priority.
Preventive debt counseling tips are not new to people. They may have heard of them from their parents or recited them in moral science classes, but all these lessons vanish while spending. A workable debt counseling method must be practical enough to be implemented. The borrower’s finance needs to be studied exhaustively for finding an effective solution. No debt counseling is complete without the borrower’s participation. Consequently, borrowers need to tread safely on any debt decision that they make.