If you are in financial trouble and not know how to get out of debt, one of the measures recommended by experts is to make a loan to consolidate debts.
This will not solve all your problems but will prevent them from getting worse. So you get a little more breath to get organized and get out of the interesting spiral.
The mechanisms for you to get into debt are all there: credit card, overdraft, bank loan, among others. All of this can help in times of financial need. But you have to be careful and plan to pay.
All these credit devices are tied to interest rates. And, if you do not pay the installments of debt, the interest will accrue as they are applied in the compound interest scheme.
So if the person delays a portion, the value of that debt begins to increase due to interest. But as debt grows, it becomes increasingly difficult to pay. And without paying it, obviously, it increases more and more.
Thus, any momentary financial forgetfulness or unforeseen event that prevents the payment of a portion sets in motion a damaging mechanism that feeds itself. It’s the dreaded “snowball” effect.
There may come a time when one is drowned in so many debts and thinks that he will never be able to pay them.
At this point, the best thing to do is not to despair. Among the steps you can take to get out of this situation, one of the most important is debt consolidation. And this happens through one more loan.
What are you waiting for? Request a debt consolidation finance
The debt consolidation loan is nothing more than a loan whose value corresponds to the sum of all your debts.
With this borrowed money, you pay all the debts, staying with only one – the debt consolidation loan. Therefore, the consolidation process is also called unification of debts.
At first glance, this may seem to mean “plugging one hole to open another”. But in fact, debt consolidation finance at source: DeDebt is a smart move to take because it brings some benefits – see below.
A single debt
Most of the time, people in financial distress do not only have one debt but several.
The person can have a debt with credit cards, another with the overdraft, another debt for the delayed condominium, plus one with the IPTU, one with the bank, etc.
With so much debt, it is easy to lose control. You have to have a very efficient plan so that each month you do not lose any maturity dates of the installments of all debts.
With too many debts, it is difficult even to know exactly how much money it owes to the whole. And that’s the first step in planning to get out of the hole.
Consolidating the debt, the person gets a debt only, with a single payment date. So she will not only know exactly how much she owes and when she should pay, but she can also track debt much more easily.
Lower interest rates
Each credit device operates at a different interest rate. It is well known that the interest on the credit card and the overdraft are very high. Bank loans tend to be smaller, for example.
Some people do not realize it. However, it is necessary to establish a priority for the payment of debts according to the interest of each one.
Debts whose interest amounts are high grow greatly each month, in absolute value. We must take care of them soon enough.
Likewise, debts whose interest rates are too high are also dangerous, as they grow sharply each month, proportionately. So, if the monthly amount of interest is still not high, it will quickly stay.
One of the main goals when making a debt consolidation loan is to swap all debts for a single debt with lower interest rates.
That way, the total amount you owe is not going to change, but it will not grow as quickly. So you get some breath to get organized.
So when taking out a consolidation loan, pay close attention to the amount of the interest rate. If it is equal to or greater than the fees you have already paid, consolidation will not help you at all!
It is also part of the idea of a consolidation loan to obtain long terms. This will reduce the monthly amount to be paid, allowing you to breathe a little more and have the debt under control.
How to Make a Debt Consolidation Loan
By now, you may have realized that unification of your debts is a good idea. But how to proceed?
The problem is that you need to find a bank or financial institution that approves the loan at the desired amount, with low interest and ample term.
This may not be as simple as the bank will know you owe. You will need to submit documents that show that you will be able to repay this loan.
You will probably need to prove your money entry and exit, as well as your stability: proving that you have a job, a fixed address of residence, etc.
What’s more, in order to get the lowest possible interest, you may have to present a guarantor or guarantor. That is someone who takes responsibility if you can not pay the installments on time.
If you do not have a guarantor, it may be necessary to make a secured loan by offering a property to the bank as collateral for the payment. In this case, make sure that you can comply with the payments so as not to lose the property!
Do not wait any longer: make an accurate survey of how much money you owe.
Look for a bank to make a debt consolidation loan and present a plan of how you plan to repay it.