Debt consolidation is a common practice to manage multiple loans and debts in a more effective way by combining them into single consolidation loan. But there are a few factors and considerations that you need to look into before you sign up a loan to consolidate your debts. The basic 5 steps that you must go through in the consolidation process are:
Step 1: Get & check your credit report
Knowing where you stand and how much you have owed is the first step in solving your debt problem. The first thing you should have is your credit report. You can get one free from one of the credit bureaus in your country. In the report, you will know your credit rating, how much you have owned, to whom you owe the money to and where you stand financially.
Step 2: Find a reputable debt consolidation service
You have many choices in selecting a debt consolidation company to help you consolidate your debt with a consolidation loan. But, it does not mean you can simply select one of them. Be aware that not all programs are created equally. When you shop around for the best debt consolidation package, you should particularly consider on how long the company have been in business, experience, reputation and their fees.
Step 3: Decide a consolidation program
Don't decide to participate into a debt consolidation program just because it looks good. You should compare different programs and list down their pros and cons to be compared side by side. After evaluate each debt consolidation program, finalize the one that gives you the most benefits. If a debt consolidation program that looks too good to be true, you should always check with the Better Business Bureau to ensure its trustworthy business.
Step 4: Select type of consolidation loan
Depending on your financial status, you may be eligible for more than one type of loan offered in the consolidation program. If you have hardship to make the minimum payments on your monthly balances because the amount is beyond your financial affordability, then you may want to look into a consolidation loan with longer repayment period that will lower your monthly repayment amount. Otherwise, if you are looking to ease the debt management and comfortable with your current monthly payment, then you might want a program with shorter repayment period. Regardless of the reasons you plan to consolidate your debt, you should make sure the fees involved in consolidating your debts are reasonable.
Step 5: Make loan repayment on time
After consolidating your debts into a consolidation loan, you now have one payment to focus on instead of multiple payments. What you have to do is make sure you make the loan repayment on time each month. You can choose to pay more if you have extra dollars so that you can clear the loan faster.
Summary
Debt consolidation is a common practice to combine your debts into a consolidation loan. The above 5 steps explain the important factors to be considered in the process of debt consolidation.
By: Cornie Herring
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