Life is confusing and will remain confusing until you get clarity regarding things. After reading so many articles on both debt and debt consolidation loan, you may be having a doubt that how is debt different from debt consolidation loan? It is quite obvious for anyone to have a doubt like this.
Well, debt is a loan made to meet the expenses when you have a shortage of funds. When these debts are not paid in time, and various such debts are summed up, and an equal amount is taken, it is called debt consolidation loan. It sounds like word game isn’t it? Both the terms have debt in them, but one is actual debt while the other is the amount to clear the debts. In simple words, debt consolidation loan can be referred as a significant debt to clear all the small debts.
Debts for defaulters
For defaulters, there won’t be any difference between debt and debt consolidation loan as they are habited to misuse the funds again and land up in trouble. But if you are sincere and honest, you will always think of your prestige and reputation and try to repay the amount as soon as possible. The moment you get debt consolidation loan and you clear all your small debts, don’t be under the impression that all your tensions have been sorted. The actual problem still lies- you need to clear this debt consolidation loan amount.
Of course, you will have additional time to clear it but, proper planning has to be done to clear this amount. Else, it won’t take much time to get the clean chit once again. So when you are opting for debt consolidation loan, please compare all the types of loans given by financial institutions and analyze the interest rates charged by each of them. Choose the lender/financial institution who gives you a loan with lower interest. This is possible when you are taking a loan amount for the first time. But if you are marked as a defaulter of payment of debt then getting a new loan is very difficult. Even if you get a loan, it will be given to you at the high-interest rate. Your urgency to settle your old bills will force you to accept the new loan with the high-interest rate. So, you should keep in mind that this loan amount is to be cleared at the earliest.
Take a personal loan
The second option is to go for a personal loan. It is a type of unsecured loan. Here you may not be asked to mortgage any of your property or assets. But beware of the interest rates charged on you. However, before issuing you the loan amount, the lender or financial institution will always check your history of payments as no one is interested in taking any sort of risk related to money matters.
In case you are labeled as a bad payer, then getting a loan is near to no. But on repeated trials, you may be given a loan as we don’t have a scarcity of financial institutions or lenders who are willing to take a risk. So it is up to you to get their services. You have to keep in mind that if you are scared of the loan amount and have decided to pay the debt consolidation amount, it is an excellent decision, but if the loan amount taken is a personal loan, then you may have to pay the penalty for repaying the loan amount early then the stipulated time. This one point creates a lot of fuss to the debtors. So proper planning has to be done regarding payment schedule also. In case you have the required funds, but you are not paying the amount immediately, then save that amount by maintaining a separate account. This saving can be treated by emergency fund and can be used in emergencies.
How to clear this debt consolidation loan amount in general?
- From your past experiences, it is clear that due to the lifestyle you landed up in making so much debt. So, changing your lifestyle is a must. I don’t say change completely as it is very difficult for any individual to change completely. But an effort can be made to cut short your unnecessary expenses.
- Make of list of debts you have to pay. The list should contain the payable interest rate also. By doing this exercise, you will get a better picture of your status and you will be able to take a good decision. Doing this exercise frequently will help you to keep track of things. You will know what your income is and what expenses you are incurring. Automatically you will be able to analyze which expense is essential and which is not? However, all expenses are meant to be, but if the priority ones are cleared, your tension can be reduced to some extent.
- Even after clearing your old debts, you will have to meet your regular expenses along with the debt consolidation loan amount to be cleared. So, prioritize your payment of expenses. When you budget your expenses, include debt consolidation loan amount also. Make a provision to clear off the monthly installments to the lender. This you have to do while clearing your regular bills. I know it is tough, but you will have to face it else you may land up in a big trouble in later stages.
- When you have planned to clear the debt consolidation loan in monthly installments, see that the installment contains both the interest and the principal amount. This will help you in reducing the principal amount and at the same time, even interest is being paid for the balance amount.
- In case you are facing a lot of problems and are unable to solve them yourselves, then opt for professional debt settlers. They guide and advise you, of course on charging you the commission amount. But you can rest in peace and think of raising funds for future requirements. A cool mind can work 100 times better than a mind with tension.
To know more about consolidation debt, you can read the other blogs, which are written by experts from their own experience and vast research!
