Are you worried about having too many debts? Firstly, don’t worry about debt, you are not alone, there are many others too, around the world looking for ways to reduce their debts. And the fact is it is easily possible if you plan and take actions accordingly and Debt consolidation is the best way to handle too many petty debts. Through debt consolidation you will be able to combine several unsecured debts into one single bill. For example credit card payment, loan repayment, medical bills and more can now be collated to one single payment. There is no doubt that this will make your life much simpler and navigating through your financial obligations will be easier.
Retirement can be tough, especially if you have not prepared for it when there was time. Retirement brings lots of financial complications. Nobody will give you loan and insurance if given will be very costly. Since you would not be earning as much as you were before retiring (assuming you have a pension scheme), should there be any surprises in life, they will leave you shaken financially. Hence it is very necessary to start preparing early for retirement, so that you remain covered in all possible ways, in all possible situations. As such, one of your most important considerations should be to be debt free by the age of 50! And going for a debt consolidation by the age of 45 will ensure that all your running debt accounts are closed and only one remains, that can be closed in next 3-5 years, thus making you debt free by the age of 50. And since your EMIs are going to come down significantly, you can use that money for savings or investments as per your choice or need.
What are the benefits of Debt Consolidation?
Without a doubt, consolidating your debts into just one will bring a lot of positivity in your life, both financially and mentally. Just to make it clear for you, let us have a look at all the benefits of Debt Consolidation:
- It offers Convenience: Making payments for multiple bills is tough to remember and it will be time consuming. This may even lead to you missing to make some payments before due dates.
- Helps Scheduling: Having too many due dates and too many payments to make will lead you to juggle between various transactions. Instead a single bill can be scheduled for auto-debit; here you just have to make sure there is enough balance in the account for payments to get processed automatically.
- Brings down Your Interest Rates: Try to check what is the interest you are paying on different outstanding debts? If these can be collated to one single payment through debt management the rate of interest will fall drastically.
- Helps in Paying off Your Debts faster: If there is easier way to get rid of the debts faster with low interest rates, make the most use of it. Prolonged debts will end up with high interest rates.
- Helps during Emergency Situations: In case of emergencies consolidating all debts to one single payment will reduce your monthly payment amount as there will a fall in the rate of interest. This will help you in saving some amount for emergency situations.
How to Consolidate Your Debts?
Here are some of the easy steps on how to go about having a debt consolidation. The whole process is broken down into few steps to make things work out easier. Banks and NBFCs are the ideal and safe place to look for a consolidation loan.
Step 1: Firstly find out what are the total outstanding debts and when they are due to get over. Make list of those debts that are long dated and with high interest rates. In case if you do not have many long dated debts, club some short-dated debts.
Step 2: Calculate the average rate of interest you are paying on these outstanding debts. Make use of these figures to find a debt consolidation loan provider whose interest rates are at least 3%-4% lower than your average debt interest rates.
Step 3: Check what are your total minimum amount payments that you are paying every month and compare it with the consolidated bank debt loan to check if the EMI on the loan is equal to or lower than your monthly minimum payments. If the EMI is lower than your minimum payment amount it is advisable to consider a consolidated debt loan from bank.
Step 4: Approach bank or NBFCs through Finance Buddha and apply for one post checking your eligibility.
When you should consolidate Your Debts?
These are the signs that you trigger you to think of debt consolidation. If you are going through these situations, it is advisable to consider this option to have a peaceful financial management.
- If your expenditure is more than your income.
- If the credit outstanding amounts are increasing day-by-day instead of shrinking.
- If the interest amount paying on your monthly credit card bill is more than your monthly expense through the card.
- If you are clearing only the minimum due amounts instead of full outstanding balances.
- If you have debt in more than 5 credit cards.
- If your debt is affecting your CIBIL scoring.
- If you are draining your credit card limits.
- If the interest on the credit card outstanding is over 18%.
Apart from these here are some of the things to be kept in mind before consolidating debts. Don’t take this option if your debts are for less than 6 months. As most of the EMI you end up paying at the initial stage for the loan will go towards the interest instead of the principal amount. If you have just one single huge debt and if the rest are minor ones, try a different option instead of debt consolidation loan.