Making The Most Of A Debt Consolidation Loan
A debt consolidation loan is an option of last resort and to be used only if you have proven that you are able to handle your money wisely. If you correct your bad financial habits, you will be able to adequately manage and you will not persist in making mistakes.
Failing to correct mistakes will ensure that a debt consolidation loan will place you in a worse position than before you consolidated. Not all bad financial circumstances are due to personal irresponsibility. Everyone at some point runs into stormy weather. However, you can learn to navigate successfully. With a debt consolidation loan, a major part of success depends on not allowing yourself to be lulled into a false sense of security.
Your problems are not over once you consolidate. Instead, see this loan as a long-term solution, realize that you are still in a lot of debt relative to your earnings, and refrain from spending more than you earn. People often engage in further irresponsible spending when they get a debt consolidation loan because the pressure is temporarily off and they feel the unwarranted latitude to buy unnecessary luxuries such as electronics or vacations.
Correct the bad spending habits and this problem won't rear its ugly head. To make the most of a debt consolidation loan, take six months to a year to establish responsible spending patterns, including paying all or most of your outstanding loans on time. Then think of the loan as a means of providing more liquidity as well as an emergency fund. Consider your options. The most viable one is peer to peer lending in the form of lending clubs.
Another type of debt consolidation loan comes from credit unions. The benefits include easy access and interest rates that are lower than those from other sources.
A third option is pledged collateral. Usually the collateral must be from a person other than then borrower, such as a family member or friend.
A fourth type is cash value life insurance. The funds available from this type of insurance come with a better rate. If you do not have this insurance, you may be able to use your parents'. The source which must be approached with the most care is family. Relationships may be strained or irreparably damaged if you do not pay the money back in a timely fashion.
Some available options must be avoided unequivocally such as loans from retirement accounts, payday anticipations loans, credit card loans, and home equity loans.
If you spend responsibly, do your homework, and use your financial knowledge and skills, you will soon be in better shape.
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