Debt Consolidation to Clean Up Your Finances

A significant challenge that many people experience as they get older, especially those who are not the best at managing money, is the mounting debt that is against their name.

Perhaps you paid for private college or university, or you had to spend a lot of money on a car or other expenses. While you may have thought that taking out loans was responsible, as they were relatively low interest, you are now having to deal with the aftermath.

Between significant loans and regular credit card debt, you likely have a lot of monthly payments to get through. Below is a guide that explains how you can use debt consolidation loans as a way to get out of such a hole.

What is Debt Consolidation?

The concept of debt consolidation in the United States is that you are taking all the money that you owe, and combining them into a single, low-interest loan. People find this advantageous, especially if they have a lot of money to repay that could take them several years to get through.

If you were to make a list of all the money that you owe each month as a result of loans or credit card bills, you are looking at a significant percentage of your monthly income. People who are giving up 50 percent or greater of their income to debt will have a very hard time making ends meet, or saving any money.

Debt consolidation loans can come in handy during such situations. By engaging in debt consolidation in the US, you can lower the amount of money that you have to pay each month to a manageable level.

Extend Your Loans

Taking longer to pay back loans, on the surface, may not appear like the smartest way to get out of debt. The issue for a lot of people is that their monthly loans are not manageable anymore. You may have taken out two or three long-term loans, while putting money on your cards, thinking that you can handle the minimum payments.

The problem is that minimum payments can add up very quickly, and if you are only paying a modest sum on each loan, you are incurring a lot of interest charges. That puts pressure on you to quickly pay off your loans, which can eat into your monthly earnings.

Taking out a single loan that you can handle with your present earnings will make life a lot easier. Depending on your current job and credit history, you may be eligible for a debt consolidation loan that is lower interest, compared to many of the loans that you are repaying.

Rebuild Your Finances

Arranging your loans into a single, manageable payment is only the first step in getting your finances in order. Limiting how much you have to pay in loans each month will make your life easier, but does not solve the root cause of the problem.

What you must tackle is your spending, as it is overspending that likely got you into this problem. To find a solution, start by spending two months tracking every dollar you spend. Assess where you are spending the most money, and what expenditures you could eliminate without damaging your quality of life too much.

Perhaps you are spending a lot of money when you go out on the weekends, or you love ordering take-out or delivery food. Such indulgences are great when you have a very high-paying job, but if you are struggling to save money, you may need to cut back on some luxuries to secure your long-term future.

Take Control of Your Life

Allowing debt to take over your life is not pleasant, and can have a significant impact on your personal and professional life. Not only will you find it difficult to focus at work, but your relationships with friends and family may be impacted by your constant stressing about debt.

Rather than letting the cycle of repaying various loans each month take over your life and consume your thoughts, debt consolidation offers an out. You still have to pay back the money you owe, but you can do so using a single, manageable loan.

You take the money from that loan, pay off all the loans and credit card debts you owe, and then start making monthly payments on the consolidation loan. Within a few years, you will be debt free. If you have made changes to your spending habits in the meantime, you will likely have significant savings by then as well.