Credit Card Debt Consolidation Loan
Now………. I now what you are thinking. Credit card debt consolidation loan, where do I start?
1) First thing to do is to write up your financial budget. This is easy – all you do is list all of your income on one side and all of your outgoings on the other. Hopefully, the figures will show that you have money left over.
2) Secondly, we need to set up a schedule of all your debts. You want to log the current minimum monthly payment, the amount outstanding and the interest rate.
3) Once you have a list, you need to categorise your debts with those being most urgent first i.e. the credit cards or store cards as these tend to charge the highest interest and those to family or friends last. Generally your friends and family will not charge you interest or begin court proceedings if you fail to make payments. So your schedule should look something like
- credit card debts
- store card debts (these may go first if the interest rate is higher than the credit cards)
- short term loans i.e. less than 5 years left to run)
- Loans from family and friends
4) Now listen closely. Be very careful if you are thinking about a consolidation loan. Consolidation loans can work for some but the fact is that most of us just end up in more debt than before. Worse than that, we have now secured our debt against an assets thus putting it at risk from creditors.Why does debt consolidation not work for everyone? Simply as it is seen as an easy way to get out of a problem but you don’t learn how to prevent your debts piling up again. You need to know how to manage your finances to prevent this situation happening again.
The good news – There is a better way of clearing your debts.
Most people will pay their minimum monthly payment and then a bit here and there to reduce the outstanding balance. But this will never clear your debts as it simply isn’t methodical enough. You need to put your contractual payments on an automatic system i.e. pay by direct debit or by standing order. Set it up today so that these payments always get paid.
Next, decide which card you are going to concentrate on repaying first. It is amazing how fast the debt elimimination program will be once you move from card to card. As soon as you get the satisfaction of clearing the first card, you then move onto the next and so on. How do you chose the card you clear first. Well some will tell you to go for the one that is charging the most interest and that is the best idea. But I go for the one I can clear the fastest as successfully clearing one debt will spur me onto clear the next one and the one after that.
So for example, if I had credit card A with a balance outstanding of $10,000 and an interest rate of 12% but credit card B had an outstanding balance of $1000 but only charged 10%, I would still clear B. Why? Because I know that I have a great chance to removing this debt and this will give me confidence in targetting the larger amount. Let’s face it, any debt that big is going to take a while to clear and patience isn’t a virtue I have!
If you think a credit card debt consolidation loan is right for you, please promise that you will cut up your cards and close your accounts as soon as the loan money clears. Otherwise, what is likely to happen is that you will end up back at square one only now you have a huge loan to add to your credit card debts.