Life is hard and when you get into a financial bind, such as needing new brake pads or tires for the car, or a water leak is discovered in the roof of your house, and you do not have the resources to pay for it. In these times, we tend to use credit cards to pay for these unexpected expenses. This is fine if you can afford the mishaps and pay your credit card off at the end of the month.
However, most people cannot afford the expense in the first place and cannot pay the credit card off every month. It builds up and builds up over time with more and more interest added to the balance. This can be overwhelming and stressful to you. Before you can be debt-free, you must learn to stop your bad habits involving money.
Keep reading for five of the top tips on how to choose the debt consolidation method that is right for you.
1. Ask for Help
Getting into debt is stressful, overwhelming, and feels inescapable.
First and foremost, do not dwell on the past. What is done is done, and now you have to focus your energy on getting out of debt. However, where do you start? Becoming informed about debt consolidation can be confusing and challenging. For debt consolidation loans, trust Latitude Financial. They can assist you with any questions you have, as they understand your frustrations and can lay out a plan for you to follow that is specially designed for your needs.
2. Get Rid of Your Credit Cards
The next best method to get you out of debt is to cut up or cancel any remaining credit cards. Once you have a debt consolidation loan in place and have transferred all your credit card balances, it is tempting to put a small balance on the blank credit card. Do not place new debt on the empty card. This will once again get you into a bind if you cannot pay off the balance.
Instead of having a credit card for emergencies, set aside a small amount of money each month to put into an emergency savings fund. This way if the car breaks down or you find yourself in the emergency room, you do not have to put the expense on a credit card.
3. Use Your Home to Your Advantage
If you have a home and a monthly mortgage, use your home to your advantage. If you can refinance it, add your credit card debt into the loan. Yes, you will have this added to the length of the long-term loan, but if you make extra payments on the home loan, you can reduce the balance faster without paying a significant amount of interest.
The key is to make sure you cut up your old credit cards, so you do not fill up the cards again. Make sure you are not living outside your means.
4. Keep a Spending Budget
Most of the time, people get into debt because they are spending more than they are making. One of the best financial methods you can do for yourself is to make a monthly budget, in particular, a spending budget.
Keep track of all expenses you have. Whether it is a random coffee at a coffeehouse or a subscription to your favourite music channel, write it down. This way you can see where your money is going and reduce your spending to make your money last longer!
5. Pay the Smallest Debt First
This is truly the way to go when you are trying to reach financial goals. It is too difficult to try to pay extra on every loan or credit card you have. Find your smallest balance, even though it may not be your highest interest, and apply all the extra money for that one loan.
Once that loan is repaid, take the amount you were paying extra on that loan as well as the monthly payment amount you just paid off and apply it to the next smallest loan. Keep doing this until all your debt has been repaid. You will be debt-free in no time!
Why it is Imperative to Consolidate your Debt
Once we get into that bind of credit card debt, it is very difficult to get your life back on track. Even if you pay more on the balance, you never seem to get ahead because of the interest that is constantly added to your balance. However, there is a light at the end of the tunnel.
By becoming knowledgeable on your expenses, paying off your smallest debt first, and budgeting for a life where you do not overindulge, you can be debt-free. This is important so you can have your time back. By consolidating your debt, you will have one monthly payment instead of multiple credit card payments. No one wants to work all the time and there are friends and family members to socialize and spend your precious time with!