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How Debt Consolidation Can Help You to Save

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With the hardships of the current economic climate, managing your finances can be tough and with mortgage repayments, bills to pay, student loans, business loans etc, it’s easy to slip into debt. However, taking out a loan can help you become debt free as it allows you to pay off small outstanding debts affording you some breathing space.

If you have find yourself with a cluster of different debts and you’re struggling, merging them together into one loan to lower your monthly payments is often a sensible shout. Now you must borrow enough money to pay off all your current debts and owe money to just one sole lender. This is known as a debt consolidation loan and there are two types. The first is secured, with this, the amount you borrow is secured against an asset which is usually the property you own. The other type is unsecured and this loan is not secured against your home or any other asset. Tough before you take out either, you should seek free debt advice as they may not be right for you.

Consolidating debts makes sense if any savings are not wiped out by fees and charges that may incur and if you can afford to keep up payments until the loan is fully repaid. It also only makes sense if you are able to use it as an opportunity to cut your spending and get back on track and if you end up paying less interested that you were paying previously and the total amount payable is less. Before accepting a consolidation loan, shop around and use comparison websites to find the best deal and seek advice before any decision is made final. Don’t place your entire focus on the headline interest rate, compare this with the annual percentage rate or the same rate for secured loans as this will include extra costs such as the arrangement fee.

Generally, loans from credit unions are cheaper than loans from the majority of providers for smaller amounts and do not trigger set-up fees, administration costs or early redemption fees. Several credit union loans cost 1% a month on the reducing balance of a loan and by law, the amount of interest charged by a credit union can be no more than 3% a month.

Choosing the right option with the right repayment options for you will see your debt reduce in no time. Loan providers like SoFi offer a fresh and innovative approach to lending that is completely different from traditional brick and mortar lenders. The company was founded by four graduate students at the reputable Stanford Graduate School of Business in 2011, the group wanted to make a commitment to offering a service that would allow students pay back their loans whilst bypassing traditional lending institutions.

With this idea in mend, they moved to accommodate a wider variety of borrowing needs and ever since, they have stuck to their word and are now one of the fastest growing alternative lenders in the industry. The group have since extended over $7billion in loans and continue to offer a range of technology driven financial lending and money management solutions including wealth management loans.

The group also work with customers to help them achieve stability,plan for their future and reach their personal finance goals. One way they do this is by helping customers reduce their debt via their loans and over time, small balances will disappear one by one, freeing up money rid you of your larger debts before paying back your loan to Sofi, stress free.

Lifestyle Changes to Manage Your Debt

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Lifestyle Change to Manage Your Debt
Sometimes real change takes a lifestyle shift, but it may not be as difficult as it sounds. If you are burdened by debt and you would like to buckle down and eliminate it once and for all, there are a few simple changes you can make to help you accomplish your goal.

Get Used to Balancing a Budget

The first step in managing your personal finances is to create and balance a budget. This is not only vital for people who have debt issues, it’s a financial foundation for anyone with budgetary goals. If you get in the habit of keeping track of your incoming and outgoing expenses, you can save money for financial benchmarks, whether that’s paying off debts, buying a house or starting a business.

Balancing a budget is easier to start than you might think, even though only a third of Americans have household budgets. All you need is an accurate representation of all of your monthly expenses and your income. If you have a steady income, you can start there. Here are the steps you need to balance a budget:

Take your salary or hourly rate and calculate how much you earn each month. It’s important to work with actually money here, not expected windfalls or potential investment returns. To accurately balance a budget, you need to use your real money.

If you have quarterly or annual incomes, like stock dividends, you can spread that money out over each month or set it aside as savings.

When you have an accurate picture of your incoming money, you can begin to calculate monthly expenses.

  • Start with fixed amounts like internet and cable bills, rent, mortgage payments, loan payments and credit card payments. List them all on a spreadsheet.
  • Then calculate payments that can change like groceries, utilities, and miscellaneous purchases. Looking at the items on your credit card bill is a great way to see where you tend to spend money.
  • Add all of your expenses together and subtract them from your income. If you have a positive number you have a balanced budget and you can choose to take the extra money and put it toward your financial goals like emergency funds, retirement savings or putting off debt.
  • If you want more savings or if you are left with a negative number, go back and look at the variable expenses. Look at ways you might be able to spend less.

Adopting a mindset of reconciling all of your purchases with your budget is a great way to be proactive about paying off your debts. Focus on limiting your expenses and putting the money you save toward paying off your debts faster.

Manage Overspending Tendencies

If by creating a budget you realize you have a tendency to overspend, there are a few ways you can keep yourself accountable. It sounds like a cliche, realizing you have a problem with spending too much is a great first step. Many people who overspend, don’t realize they are doing it and it may be that you just need to remember to watch yourself when you are shopping. Here are some other ways to manage your overspending:

  • Pay with cash. Credit and debit cards make spending easy and out of sight. You may not realize how much you spend until you receive your bill. If you use cash, you can see the money leaving your wallet and when you run out, you know when you need to stop spending.
  • Limit your number of credit cards. If you have too many credit cards, it can be difficult to keep track of how much you are spending. If you have a serious problem with spending, it might be best to get rid of all of your credit cards.
  • Find someone to keep you accountable. A friend, spouse or family member that knows you want to limit your spending can help keep you from going overboard. Ask them to check up on your shopping and spending week to week.

Consider a Personal Loan

A personal loan is a great way to consolidate debt into one monthly payment and generally offer considerably lower interest rates than credit cards. Take a look at some of the personal loan options that are out there, and be sure to choose one that is ideal for paying off debts.

Get a Side Job

There are a number of benefits to having a side job, not the least of which is the extra money. Even if you are making enough money with your main job, a side job can give you the means to really bolster the payments you are making toward your debts. You can even do some freelance work so you can take on extra jobs when you have time and have no obligations when you don’t.

Side jobs are also a great way to diversify the type of work you do and the experience you accumulate. Having more than one type of work experience can be good if you want to find a new job in a different area of expertise.

Side hustles can also open new doors and opportunities. You may find that your side job is more interesting to you and new business paths can open up.

Do you have any tips on how to manage debt? Share your thoughts below.

Photo: Flickr: Images Money