Accumulating debts isn’t as taboo of a financial topic as it was in years past. These days, with the cost of living increasing at a faster rate than the cost of labor, it’s unsurprising why so many families have acquired various forms of debt.
When it comes to dealing with debt payments, it can feel overwhelming to know where to begin or which avenue is best suited to your unique situation. That’s when it becomes important to understand what your options are.
In this article, we’re taking a closer look at debt consolidation — what it is, how it works, and how borrowers can apply its practices to their own financial situation. With these insights, we’ll help you identify whether debt consolidation is the right choice for your household.
What is Debt Consolidation?
To put it simply, debt consolidation is a process that involves combining multiple payments into one monthly payment. It is often used to streamline the process of paying creditors and makes it easier for borrowers to include these payments into their monthly budget.
Your Consolidation Options
There is no one-size-fits-all solution when it comes to streamlining your debt payments — which can be a good thing. More options mean you have a better chance of finding the consolidation solution that works for you.
A consolidation loan is a convenient way to acquire the money you need without having to go through the red tape often found through traditional lenders. Virtual-based options like FlexMoney allow borrowers the flexibility and efficiency they need to handle their debt situation quickly and effectively.
In other cases, a line of credit may be the right option, though this is traditionally done through your bank and could mean longer wait times and multiple pieces of paperwork before you’re able to access the funds.
How will you know if Debt Consolidation is Right for you?
Every borrower’s financial situation is unique, which means a solution like debt consolidation may or may not be a suitable solution. If your regular payments do not exceed 50 percent of your gross income, and you’re able to pay off your consolidation loan within five years, consider this a viable option.
If your debt is on the minor side of the scale, consider allocating from your entertainment or variable expenses and making larger payments to get rid of your debt faster.
What to Remember After Consolidation
If you manage to access the money you need to streamline your monthly payment process, it’s important to keep in mind how you got into debt in the first place and be vigilant and hold yourself accountable to avoid falling into the same pattern.
Making your monthly payments on time is the first step but if you’re able, going beyond that will help you pay off your debt much faster. The more you can pay down each month, the less interest you’ll procure, and the faster you can find your way to true financial freedom and start with a clean slate.