Everything That You Must Know about Debt Consolidation Loan Before Applying for It

Hardly anyone in today’s world can claim to have fulfilled all of their responsibilities and wishes without needing to borrow money from time to time. Times are hard, and at some point in our lives, we feel the need to take a loan to manage expenses on time efficiently. However, repaying the borrowed sum may sometimes be challenging.

If you have multiple loan repayments to think about, and if the constant payment reminders are stressing you out, you might want to consider availing a consolidation loan.

applying for debt consolidation loanWith proper debt consolidation, you can bid goodbye to the burden of making multiple payments each month. You would only need to pay once and on a monthly basis after consolidating all your loans into one. Restructuring all existing debts and combining them into one may even help to reduce the overall interest rate to some extent. This type of loan can relieve some stress, both financial and psychological, by helping you to put a check on other debts that may keep piling up otherwise.

What is a debt consolidation loan and how does it work?

Debt consolidation typically refers to the process of taking out a loan to pay off multiple others loans, liabilities, consumers debts and so on, which are usually unsecured ones. This new debt may be massive in size, but it also has more favorable payoff terms. It may even come with a low-interest rate or lower monthly payment, and sometimes, it may come with both. This type of loans can be useful in paying off student debts, credit card debts and other forms of financial obligations that one may accumulate over a considerable period.

In theory, debt consolidation is only the process of financing multiple loans, but it is noteworthy that there are specific instruments which creditors can offer the borrowers. Creditors willingly do this due to many reasons. One of the main reasons is that this type of loan significantly increases their chances of collecting from a debtor. It is also one of the main reasons that established and recognized financial organizations like banks and credit unions offer debt consolidation loans to those who face difficulty in managing their payoffs or the size of their outstanding debts. Due to this, debt consolidation companies have also become quite prevalent over time.

Which types of loans can you consolidate with debt consolidation?

There are quite a few types of loans that you may want to consider while consolidating your debt. Out of these, the most common ones are:

  • Home equity loans
  • Credit card balance transfers
  • Personal loans

Home equity loans: This loan is taken out by using the equity in your home as collateral. A fair amount of capital and good credit are the prerequisites for a home equity loan. Even though this financial arrangement puts your home on the line, it does come with typically low-interest rates. Down the path, if the payments become too much to bear, you can go with foreclosure on your home.

Credit card balance transfers: This service enables you to transfer your credit card balances, all of them, into a single credit card. It also comes with a low-interest rate. What is noteworthy here is that low balance transfer rates are mostly promotional rates, and in most cases, they expire after a period of six months. So, you must keep track of time and note when the typical transfer rates will start to apply. To use credit card balance transfer in a debt consolidation loan, you must first have a credit card with a credit limit that is big enough to hold all your credit card debt.

Personal loans: As per the experts at nationaldebtrelief.com, personal loans are a popular choice for debt consolidation. However, you must first be able to get a loan that is large enough to cover all the balances you may have. A personal loan is an unsecured loan. It comes with the condition of fixed payments over a stipulated period. Upon approval, you may use your this credit to consolidate your debts.

What are the main benefits of debt consolidation loan?

Debt consolidation loan, if you qualify for it, can certainly put you in an advantageous position, and that too, financially, socially and psychologically. Take a look at the five main benefits of going with debt consolidation loan:

Single payment: As stated earlier, this type of loan enables you to combine all your debts into one. This way, you only need to make one payment each month. When the loan amount has been paid off, you would have successfully taken care of all your debts and would not have to worry about any consecutive payments.

Lower interest rate: You can save a significant amount of money as this type of loan comes with less interest, especially when compared to the astronomical interest rates on credit card loans. With debt consolidation loan, you can save money not only on monthly payments but also over the lifespan of the credit.

Good credit score: Inconsistent payments compromise your credit score severely. If you manage to get your debts consolidated and stay on top of the monthly payoff, you can work towards rebuilding your credit score steadily.

End to collection calls: Often the failure to make payments on time leads to the creditor handing over the collection duty to agencies. It means that your phones start ringing more often with collection calls. It increases both financial and societal pressure on you. With a debt consolidation loan, you can put an end to such harassments.

Stress reduction: Can you imagine the peace when you know that you do not have to worry about paying off multiple loans, and when you are not disturbed by creditors’ call now and then? All you have to do is arrange for just one payment, on time, each month.

One fact to remember while trying to consolidate your debts with a new loan is that this borrowed sum is not exactly helping you get rid of your debt. You will still have to pay your dues; you will have to plan your finances efficiently, and you will need to be careful about not borrowing more. However, having to pay just one stipulated amount every month might make you feel relaxed. You are just shuffling the debt around to find a more manageable way to pay it off. Practicing discipline and avoiding any new loans until you repay the entire consolidated debt amount would indeed be wise. Try to reduce your expenses so that the need to borrow anew does not arise. In case of difficulty, you can always consult a financial advisor.

Holiday Debt And How To Tackle Them Early On

holiday debtAt the start of the year, there is a big chance that you are thinking about holiday debt you incurred during that frantic celebration week. From gift giving to parties and even last minute travels, the holidays could have set you back in your budget. As a result, your first financial challenge for the year is overcoming that debt.

It might be a little disappointing because you are trying to get ahead at the start of the year. However, the debt you incurred is pulling you down and bringing you in a different direction. Rather than think of strengthening your finances, you are too preoccupied with thinking of ways to pay down your huge debt amount.

Americans added over $1,000 in credit card debt over the holidays according to CNBC. That is a big amount to overcome especially if it is not included in the budget. There are people who might be able to pay that holiday debt in a month or two. However, the reality is that a lot more consumers would have to pay for it for for a longer time.

This is one of the downsides of holiday expenses that went unguarded. As you enjoy the time with family and friends, you might have lost track of your budget. It is possible that you had one to start with but along the way, you just got into the moment and started buying gifts for everyone you know. You could have booked a last minute travel just to be with family and other people close to you.

These and a lot more could have resulted in accruing a lot of debt over the holidays. That being said, here are a few things you can do to get over that financial hump.

Review your holiday debt

Calculating The Household BudgetNow that you are looking at that mountain of debt you got over the holidays, the first thing you need is to review your expenses over the holidays. If the debt you accrued is all on your credit card, you can check your statements as well as the receipts you have for all your purchase. It would be better if you can list them all down so you have a working list.

Next thing you need to do is totally all of them and check if you come to that same total as your debt amount. At this point, it is a smart move to check each and every expense item. What you are looking for are anomalous transactions if any. Also, try to identify impulsive purchases that you made over the course of the holidays. It can help you identify your triggers such as sale promos or even seeing the same item from friends and family. This will help you avoid the same things the next time the holidays come around.

Have a concrete household budget

Once you verify the purchases that led to your holiday debt, the next thing you need to focus on would be your household budget. You need to have an idea what your financial capability is when it comes to paying off debt from the holidays. It is important that you know where you stand financially so you can pay off your debt.

Analyzing your household budget is a pretty straightforward process. You just have to factor in all your sources of income. Next is making a list of all your expenses that you have to attend to month on month. Much like your income, this needs to include all your expenses. From basic needs big-ticket debt payments, you have to include everything.

Start looking for a debt payment strategy

As soon as you have a clear picture of both the debt amount you owe and what you have in your budget, it is time to start thinking about a repayment plan. There are a number of payment strategies you can use to directly address holiday debt. Each of them has their own financial advantages and disadvantages.

One of the payment strategies is the so-called avalanche method where you set your sights on the accounts with the highest interest rate. This is meant to help you save interest payment in the long run. Another strategy is the snowball method where you set your sights on the accounts with the lowest payment amount. This strategy gives you mental wins that encourages you to pay off more debt items in your budget.

One other payment strategy you can look into is debt consolidation. From the name itself, the strategy involves combining your debt payments under one account. For one, it helps you manage your debt payments better. Once you combine your payments, you get to focus on much fewer details and lower the chances of overlooking payment due dates. You can also enjoy the benefit of lowering your monthly payments due to a higher credit score or longer payment period.

Widen the gap between income and expenses

When you start talking about debt payment, your budget plays a big role in determining how you pay it off. One thing you need to remember is that the wider the gap between your income and expense with your income on top, the better off you would be. This would give you more room in your finances and allow you to make extra payments towards your holiday debt.

The most common thing people do is to lower down their expenses. After you have put together your budget, you still need to conduct a thorough review, especially on your expense side. What you need to look for are areas to cut down further. The more expenses you free up, the more you have to double down on debt payments.

Another strategy that a lot of people prefer is looking for ways to increase their income. Traditionally, this used to involve taking on a second job. Something they can do after their day job such as bartending, waiting tables or even pulling double shifts at work. There are those that choose to take on online jobs to earn more money. Others prefer to earn from their hobbies which allows them to earn good money doing something they are passionate about.

Plan for the holidays early on

One of the most effective strategies to address holiday debt is to prepare for it early on. Now that you have an idea how much debt can set you back at the start of the year, you can choose to be proactive for this year. One of the best ways to do that is to make preparations so you do not go through the same mistakes once the holidays come around.

For one, you need to list down all the people that you gave gifts to during the last holiday. This will allow you to assess the overall picture. Next is planning early on what to give them and saving up for that expense. Putting aside a small portion every month is better than stressing out where to get a large amount come the holidays.

Holiday debt carryovers to the new year mostly because you were not able to plan for your expenses early on. It is still at the end of the year but if you plan on it early enough, you can enjoy the holidays without having to lose sleep over your debt payments.

Effective Debt Payment Strategies For The Year

Effective Debt Payment Strategies For The YearAs the new year dawns on us, one of the best ways to manage your finances is to look at effective debt payment strategies. You can simply choose to keep on paying the minimum on your financial obligations and that is fine. At the very least, it will keep you current. However, if you want to have better control over your finances, you need to re-think that strategy.

For one, you would end up paying a considerable sum on interest alone. Minimum payments tend to have interest fees tucked in on the amount. You also have to look at penalties and other related fees if you do not pay amounts in full. Overall, minimum payments can be easy in the pocket but can cost you a lot over time because of interest and fees.

One positive thing you have going is that your payment gets reported in your credit score. That is if you are making on-time payments. Late minimum payments will not only stain your credit report, it can also lead to a lot more penalties and fees than what you are dealing with at present. As a result, you pay more and your score dips.

These are just some of the reasons why you might want to look into effective debt payment strategies to manage your finances. It would be a great start for the year as you use strategies that can get you out of debt faster. The sooner you can do that, the more funds you can put into your future financial needs. That being said, here are a few things to go over to help you identify an effective strategy for debt payment.

Audit your debt obligations

On top of your list should always be an audit of your debt obligations. It is an important first step so you know what you are facing. This step is easy and straightforward because you just list down all your debt payments. From your mortgage loan to car loan, student loans, as well as your credit card payments. You need to be able to list all of them down.

The challenge starts when you are in debt denial with some of your financial obligations. It can be that one credit card that has already been maxed out. It might also be a payday loan you are trying to avoid. As you list down all your debt obligations, you need to be very honest with yourself and be truthful on what you put on the list. Only then will you be able to see the whole picture and look at effective debt payment strategies.

Tackle high-interest debt payments first

One effective strategy to pay off debt is focusing on the accounts with the highest interest rate. Sometimes referred to as the “Avalanche” or “Debt Stacking” method, this helps you save on interest payment down the road. This usually comes out to be your credit cards or other unsecured loans that you have taken out.

Take note that you still need to keep paying all your other debt obligations. You can put in a minimum amount on all while putting a little extra to that one payment with the highest interest rate. Once you have paid off one, you set your sights on the next highest rate and then the next one until you have paid off all your debt obligations.

Prioritize paying off smaller debt amount

When you start talking about effective debt payment strategies, you can also consider the “Snowball” approach which can fast track debt payments. Much like debt stacking, the priority this time are the ones with lowest total amount regardless of interest rate. As you finish one account, you simply add what you were paying for it to the second smallest payment. As you do this, you get to pay off your obligations one after the other.

What this debt payment strategy gives you are small mental wins that you can take to the next one. There is a certain feeling of accomplishment when you pay off any type of debt. It gets you excited to pay off the next one and the one after that. Soon you would have paid everything because you were getting those small wins at the beginning.

Debt consolidation

With the two options above, you still have to keep an eye out for each and every one of your debt accounts. Missing one could lead to bigger debt payments at the end of the month. If you have the ability to meet your payments but you are just struggling with keeping up with the payment schedule, you need to consider consolidating your debt.

This is one of the effective debt payment strategies that a lot of people have been using. As the name suggests, this will entail combining most, if not all of your debt obligations under one account. If you have five different credit cards with various lenders, you are juggling multiple payment details. From the due date to the payment amount and even interest rate.

Once you combine your debts into one account, you will only have to manage a few payment details. As you do that, you lessen the chances of missing a payment. In the process, you reduce the possibility of paying unnecessary fees and penalties. You can also lower your monthly payments either with a higher credit score or even by stretching the payment timeframe longer.

Analyze your debt problem

When you start to look at effective debt payment strategies, you might be tempted to just look at how you can pay it back. After all, that is the end goal. However, you can quickly get back in debt if you do not analyze the problem. Paying off financial obligations could simply be treating the symptom and not addressing the cause.

You might be able to pay off your credit card debt you accrued because of uncontrolled shopping. Value Penguin even shares that balance-carrying households have an average of over $16,000 in card debt. But sooner or later, you will be in debt again if you do not change your shopping ways. As you pay off your debts, you need to make sure that you keep your impulsive buying behavior in check as well. It will turn into an endless cycle of payment if you add debt just as fast as you pay them off.

When you pay off your financial obligations, it will be a big help if you understand why you got into that position in the first place. Is it because of impulsive shopping, an unexpected emergency, or even a medical need? As you identify the reason why, you stand a better chance of protecting your budget. This will help ensure that you keep debt at bay and protect your finances as well.

There are a number of effective debt payment strategies out there to help you address your debt problems. They can give you the chance to save on interest payment or even give you small wins to keep you going. Debt consolidation can also give you the peace of mind where you simply have to focus on one set of payment details every month. If you get to enroll it in automatic debit, you get to enjoy the freedom of checking in every month and be able to set your sights on more important things in life.

Tips To Address Financial Burnout Before The Year Ends

Tips To Address Financial Burnout Before The Year EndsFinancial burnout is one situation you wouldn’t want to be in the middle of as the year comes to a close. But the reality is that there are quite a number of consumers who feel this way as they start to take account of their finances. They feel that they are in the middle of a personal crisis and simply start to feel the weight of that on their shoulders.

This is a hard place to be in and could send you down into a tailspin to debt. Not to mention that there are situations that adds stress to your finances. There are a few signs of burnout that you need to look out for. One is being in a constant state of physical exhaustion. You could feel fatigued, appetite loss, and even getting sick all the time. Apart from physical signs, it can also manifest emotionally.

Financial burnout can also be preceded by loss of emotional control. This is where you might experience an unexplainable mood swing. You could be happy one minute then sad and frustrated and even angry the next. One severe sign of burnout is depression where you don’t see the point in all the things you do in life.

These symptoms further underscore the importance of addressing burnout as soon as you recognize the signs. If left on its own, it can develop into something more serious. When this happens, treating it could take a lot longer time than it should. If you are experiencing it this close to the holidays, here are a few things to consider to help you get back up on your feet.

Look for an underlying reason

There is a possibility that financial burnout could simply be triggered by a more serious problem. That being said, it is important to look for this trigger. This sound pretty simple but the process can differ from one person to the other. The time it will take to get to the answer could be quick and short for some while it could take a lot longer time for others. Remember that as Bloomberg shared, the top three stress triggers for Americans are money, work, and the economy.

This means that it is best to get started with it as soon as possible. The sooner you try and identify the reason for your burnout, the faster you can correct it. Some of the underlying reasons could stem from broken relationships at home, stressors at work, or even substance abuse. Once you understand what is causing your money burnout, address them at the soonest possible time.

Audit your expenses

Taking a look at your expenses might give you an idea on what is causing your burnout. A good place to start would be your household budget. You should be able to quickly have an overview of your expenses and pinpoint friction points in that list. These are the ones that are giving you the most problems such as high credit card payments or high-interest rates.

Once you identify these friction points, look for ways to lower down the amount of money flowing out of your budget. One idea is to adapt a frugal lifestyle. This is where you try and live under your budget. This way, you get to save a few extra dollars every week or month. At the same time, you also develop the habit of managing your income better.

Increase your take-home income

stack of moneyOne of the things you can do to help you deal with financial burnout is to try and look for ways to increase your income. Of course, this will be most effective if you find yourself in a situation where you try your best to make ends meet. Living on a shoestring budget and being scared of the bills that come due at the end of the month can bring you stress.

Of course, you need to make sure that you are burned out not because of too much work. This is because increasing your income would require a lot more effort from you. You might end far worse from before if you look for another job when you are already trying to hold on to 2 jobs already. Learning a new skill you can earn off from, looking for passive income, or simply working smarter might help you put in additional income in your budget.

Stop comparing yourself with other people

Otherwise referred to as trying to keep up with the Joneses, you need to stop comparing yourself to other people. Just because your officemate went on a trip with his whole family means you have to do the same. Also, you do not have to get a new car at the dealership because your neighbor just drove up a new one on their driveway.

You need to make sure that you stick to your own financial targets and goals. Your officemate might have been saving for that trip with his family for a year. Or that new car up on your neighbor’s driveway could still be on installment for the next few years. Stick to your plans and be happy with the success of other people.

Consolidate your debt payments

One of the reasons why you could be having a financial burnout is having a tough time managing your debt payments. You could be juggling multiple credit cards and the multiple payments that come with it. Over time, you might overlook some of them and add up unnecessary charges and penalties on the succeeding statements. This, in turn, will make you pay more than you should.

Consolidating your debt can give you an easier time managing your payments. Rather than trying to juggle multiple debt payments every month, you only have to worry about one payment for most, if not all your debt obligations. You do not have to keep tabs on multiple payment amounts spread across different dates in any given month. It will now just be one due date for one amount and for one interest rate.

Set realistic goals

There are times when the stress comes from unmet expectations and this can be the result of unrealistic goals. Take for example your retirement savings. You might be pushing yourself to set aside huge amounts every month when you can only really save much lower than that. What happens is that other areas of your finances start to be affected.

You need to identify realistic goals so you do not put any additional and unnecessary strain on your finances. If you need to dial down your targets just to give you a little more breathing room then do so. You can simply find ways to increase your income in the coming new year. When that happens, you can now allocate more to your financial goals.

There are signs that you are already suffering from financial burnout but there are ways to address them as well. After acknowledging the problem, you need to start working on it especially as the holidays are just a few weeks away. It is best to end the year on a high and positive note rather than from a gloomy and dark place. It will also help you start the new year right.

Financial Checklist Before The Hectic Holiday Rush Starts

Financial Checklist Before The Hectic Holiday Rush StartsAs the year slowly comes to a close, it is a good idea to revisit your financial checklist for the current year. You need to assess where you are financially for a number of reasons. It can be to prepare you for next year. It is also possible that you might be able to make some last minute changes to meet your financial goals.

Your checklist needs to be thorough enough to give you a concise overview of your current financial state. The closer to reality it is, the better you can plan your succeeding actions. Once you are able to accomplish this, you get to end the year right. With that, you also get the chance to start the new year on the right financial footing.

There are a few weeks before the holiday rush so here are a few things you can do to get started with that financial checklist.

Is your household budget able to cover your daily needs

Your household budget is one of the pillars of your financial strength. There are times where the two are equally proportional to each other. The stronger your budget id, the better your finances usually are. But how do you strengthen your finances? Aren’t they just a bunch of numbers you take a look at from time to time?

This is where a flexible budget comes in. It has to be proactive where you can make changes on the go. To do that, you need to have contingency measures for possible scenarios. How will you move your payments around if your salary does not come on time? Where will you get the funds to pay for an unexpected emergency?

For one, your reserve funds can help manage financial emergencies at home. It can also prevent you from getting into debt whenever a crisis happens. Paying ahead on your bills can give you a few days or weeks of lead time before you actually get hit with penalties and late charges. These are just some of the ways with how your budget can be proactive.

Are you on target with your financial goals

Part of your financial checklist should be monitoring your goals or targets. These are the ones that you have set your sights on early in the year. It can be strengthening your emergency fund or adding a considerable amount to your retirement fund. It can even be adding multiple income streams in your budget. A side hustle or an online business can be great sources of additional income every month.

What you do is to list down all those targets that you set out at the start of the year. You then make an honest assessment of your current status. You also need to look into the efforts that you put into reaching your goals. It is important to consider several factors to allow you a more realistic assessment of your financial goals and targets.

If you are concerned about your reserve funds, the easiest thing to do is look at the current amount. However, you need to factor in the times where you had a need for it. This is because if you have been using it at different times in the year, you might not reach your target amount at the end of the year.

What is your net worth at the close of the year

One other item you need to take a look into when going through your financial checklist is your net worth. This is where your assets exceed your total liabilities. This is a good barometer of how you are managing your finances for the past year. At the simplest explanation, this is the value of the things you have after deducting the amount of the things you owe.

This is an important part of your checklist because it lets you know if your finances are performing well. You might think that because you have a big pay, you are doing good. But if you start to factor in your debt obligations, you might even have a negative net worth. The higher your net worth is, the better you are managing your funds.

Take a look at your credit report

A financial checklist is not complete without going through your credit report as well. This gives you a bird’s eye view of your financial activity. You can easily check out the activity in your accounts and be able to detect anything out of place. As you do that, you are able to prevent or limit the effects of identity theft as well.

It is important that you have an idea what your credit report is to be able to manage your expectations when it comes to your score. Taking care of your credit score gives you the opportunity to take advantage of the financial benefits it brings. If you are looking at taking out any type of loan by next year, a high score can give you a low-interest rate.

As you try to get a copy of your credit report, you might be happy to find out that you can get free ones. The Federal Trade Commission has The Fair Credit Reporting Act or FCRA. This basically allows consumers a free copy of their credit report once every 12 months from credit reporting companies. It can be requested from TransUnion, Equifax, and Experian.

Your debt payments need to be part of your financial checklist

As you look at your finances, you need to make sure that you also put focus in your debt obligations. This can range from your mortgage and car loan payments, student loans, and even payday loans if you have any. The best thing to do is to tally everything up. This could be a bit scary at first because you are forced to face all your financial obligations.

After you have everything listed down, it is time to put it side by side with your income. Apart from your daily needs, you should have enough in your pay to cover your debt payments. If not then something has to give. You could either start cutting down on your expenses, increase your income or do both at the same time.

If you are able to cover all of them but the problem lies in managing the numerous payments, you can look into debt consolidation. Take your credit card payments for example. If you have multiple card payments that you are trying to manage on a monthly basis, there is a big chance that you are working with multiple payment details. This can be several due dates, payment amount, and even interest rate. Consolidating your loans can give you an easier time managing your finances. You can also explore lower monthly payments.

Your financial checklist will help you get a better handle on your finances before the year ends. Putting together the list makes you look at all good and bad decisions you have made throughout the year. From that one day of splurging in your favorite shop to taking in a few weeks of extra work in the office. All these would now factor with how strong or weak your finances are.