How Consolidation Debt Leads to Becoming Debt-Free
Individuals and families don’t set out to get into so much debt that they are in danger of losing everything. Buying things on credit and getting loans for cars and a house doesn’t always translate into disaster, unless a person gets overextended. Then all it takes is an economic reversal, illness or loss of a job to create a problem. At that point, some sort of consolidation debt becomes a viable consideration.
The first thing to do when debt overwhelms you is to sit down and list every single debt. This includes all credit cards, including as gas, store and more general credit cards. List minimum payments and when each is due during the month along with the total owed and interest charged. List loans for the cars and house and any other loans, total owed, payments, interest and due dates.
Next, list assets: This includes wages and other work-related income, income from investments, interest, rent, alimony and any public assistance. List basic expenses for rent or mortgage, utilities, taxes, food, clothing, etc. After subtracting basic expenses, is there money left over? This is money that can be used to pay off debt.
With this information, credit counselors will assist you in finding a positive direction for your financial future. It may involve consolidation debt. They can negotiate with your creditors to reduce fees and interest rates. Then they’ll combine all of your monthly debt obligations into a single payment that is both affordable and can reduce your debts quickly.
Other options include consolidation loans, settlement, and bankruptcy, but these should all be avoided in almost all circumstances. Consolidation loans try to pay off debt with more debt, which can lead you to an even more dire situation than before. Bankruptcy and settlement can ruin your credit, making it impossible to perform a lot of financial activities in the future. Take the safe route and consolidate your debt to pay it off and improve your credit rating.
Once you’re finally out of debt, learn to stay that way. Make a budget and learn to live without credit cards.