Expert Debt Management
Expert Debt Management
Do's and Don'ts of Debt Consolidation
Debt consolidation can be tricky. Some people find a way to manage it on their own; others turn to professionals for help. No matter which path you choose, you want to do things that will help improve your long-term financial health and avoid things that work against your goals. Here are some helpful do's and don'ts to keep in mind while you are a consolidating your debts.
Do Contribute to Your Savings
Admittedly, it is hard to think about putting money aside when you are already stretching your budget to pay off debts. However, think of how you got into debt in the first place. In many cases, it was probably because you did not have enough cash on hand or did not use a prepaid debit card to take care of the unexpected expense or purchase. Think of how much money you could have saved if you had paid cash for those expenses instead of going into debt. Even if you have to reduce the amount of money you set aside, it is good to keep a healthy savings account balance so that you are not tempted to borrow more money.
Don't Be Stubborn
If you have tried everything, you can think of and you cannot make your debt consolidation plan work, then it is time to get professional help. Do not be ashamed to admit that the situation might be beyond your means. Companies like debtconsolidation.com can offer you advice on a variety of debt consolidation solutions that you may not even be aware exist. If you have done all you can do, then just do not throw your hands up in frustration and give up, find a specialized agency that can help you get back on track financially.
Do Try to Negotiate
Many creditors will work with you if they know you have financial trouble. It is as much of a hassle for them to send you to collections as it is for you to have to deal with a collection agency. It never hurts to call your creditors and see what if they are willing to offer your deal. In some cases, they may even accept a settlement amount that is significantly lower than your full balance. You will never know unless you take the time to ask.
Don't Keep Using Your Cards
If you take out a loan to pay of your credit cards, the last thing you should do is run the balances up again. After all, the whole point of paying them off was to consolidate your debt, but if you start charging things again then all you are just digging yourself into a deeper debt hole. Take the credit cards you have paid off and put them in a drawer so that you will not be tempted to use them. Keeping the accounts open is good for your credit score, but only as long as the revolving accounts have a very low debt-to-balance ratio.
Do Compare Rates
Using a loan for debt consolidation can be a great way to save on high-interest credit card debt. However, not all personal or debt consolidation loans come with rates that are better than other types of debt. For example, most personal loans come with a higher interest rate than student loans do, so it makes no sense to trade one for the other. Do not be so eager to roll all your debt into one payment that you end up costing yourself more money because you traded a low interest debt for a higher interest rate product.
Don't Skip Payments
As blunt as it sounds, it is better to let the cable be cut off than it is to make late payments on your debt. One or two late payments may be enough to cost you some financial penalties. That same number of late payments, or more, could get you thrown out of some debt consolidation programs or cause your creditors to feel that you have violated your agreement. The most important thing you can do is make sure that you always make your debt payments on time.
Getting out of debt is not easy, which is why so many people choose to live their debt and struggle month-to-month to get by. Wouldn't you like to see more of your hard-earned income staying in your pocket instead of going to bill collectors? It will be a huge relief when you can sit down, pay your bills and still have some money left over. Create a debt consolidation plan, stick to it, and you will be much happier with your financial situation.
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