Think About Debt Consolidation Loans First
While you are looking for a way to get out of debt, it is possible that you have come across debt consolidation loans. While these will offer you the chance to make one monthly repayment and can help you to get out of the mess you have gotten yourself in, you should look at other ways to get out of debt first.
The problem with debt consolidation loans is that you have no idea on what will happen in the future and you are not creating a solution to your problem. The first thing that you should do is look at setting up a budget so you can see just how much money you have going out and what you are earning. This can also help you see whether you need to try and earn more money or whether you need to look at cutting down on your expenditure.
If you have already done that and are struggling, you should still not consider debt consolidation loans. First of all, try calling the companies and find out whether you can come to an agreement on monthly amounts or freezing interest. At first, it is likely that you will be told no so simply ask if you can speak to a supervisor. Now it is time to explain how tight your budget is and that you will need to look into financial advice and possibly bankruptcy if you and the company cannot come to an agreement; you will be surprised by the amount of companies that will negotiate after that.
If this is still not working, debt consolidation loans are your next step. You will need to shop around for the best deal on your loans to make sure you get the lowest amount of interest possible and also the amount of money that you need. Sometimes, you may find that taking an extra 500 dollars will work better because the interest rates can change depending on the amount of money that you take; a $6,500 loan can have an APR of 16.1% but a $7,000 loan may have an interest rate of 8%.
You will need to seriously think about the amount of money that you can afford to pay each month for your loan and see if the provider can help with that. Sometimes, it will mean having the loan for longer than you initially wanted, which will mean more interest; this is one of the downsides of taking debt consolidation loans.
Stay on top of your repayments for any debt consolidation loans that you take out. Defaulting on just one payment can cause damage to your credit report and it will stay there for two years, at least. If you are struggling to make the repayments for any reason then you should call the provider to see if there is an arrangement that you can both come to.
You do need to be careful about debt consolidation loans. While they can offer you a more organized way of getting out of debt, you can also find that they will harm your credit rating as lenders realize that you needed help getting out of debt in the first place.