For many individuals who may have found themselves facing too much debt the number of options they have access to nowadays has increased immensely. Having access to credit generally means that you need to be able to afford to repay creditors too. If you can’t afford to, the good news is that you have recourse in the form of debt consolidation programs.
This is a process that converts your multiple debts into a single, manageable monthly loan payment. Debt consolidation may help you to improve your cash flow and may result in a lower monthly instalment.
Debt consolidation allows you to save on multiple fees, service charges and debit order charges on various loans you may have.
Through debt consolidation, individuals generally use a big loan amount provided by a lender to pay a number of smaller loans off. This has its benefits and pitfalls.
For instance, there is only one monthly payment to worry about. You can also save on administration and transaction costs.
Debt consolidation programs typically extend the loan repayment term. They are also useful for paying credit cards with high interest rates.
What does it take for debt consolidation programs to work?
The first thing that is required is financial discipline. By using debt consolidation to settle your debts, you essentially have the opportunity to save money. This means that you need to ensure that you avoid using the extra money you have to get into further debt. You need to prioritise paying the loan amount on time every month and making sure that you don’t accumulate any more debt.
You need to be conscious of the risk involved in taking this loan. For instance, if you use the equity in your home loan you stand a chance of losing your home should you default on payments.
In order to find the right debt consolidation programs it’s important to approach lenders with whom you already have a relationship. These lenders are more likely to know a lot about your financial standing, which means that they may be more likely to consider you a low-risk client.
Do your research. Make sure that you find reputable lending institutions to facilitate the process. In South Africa, lenders are required to be registered with the National Credit Regulator. The lender you choose should be able to provide you with a solution that is tailored to suit your unique needs.
Use online search tools to find the most attractive debt consolidation deals. The internet has made it much simpler to find the resources individuals need. So you need to take advantage of this by using the wide array of sites that are dedicated to helping you compare the best debt consolidation programs.
You need to choose the right type of solution for your needs. So if you opt for using the equity in your home, it needs to make sense to you financially. If you choose the balance transfer card option, there should be enough credit available to cover the entire debt.