Dept creeps up on us in many ways, be it personal debt such as home and car loans, or from our business. It can be hard to keep track of everything and many business owners find themselves just barely able to cover their interest rate, let alone making repayments on the loans themselves. If you find yourself in a similar position, consolidating your debt might just be your best option.
Debt consolidation is the process of transferring all of your debt into one place with as small of an interest rate as possible. This way, you aren’t juggling multiple repayments and multiple interest repayments. This can help you get back on top of your finances.
- Before You Pull the Trigger Talk to an Expert
Before you commit to any kind of financial restructure, you need to know what you’re doing, have clear goals and know what to expect in the long term as a result of this process. The only way to know that you are for sure doing the right thing is to talk to someone who knows what they are doing or using a service that specialises consolidation to ensure you are minimizing the risk.
One example of such a service is debt consolidation loans from Latitude Finance, but you can also talk to your credit provider or a financial counsellor. If your current provider, loan holder or bank is being difficult you should go to the Ombudsman for free dispute resolution.
- Look Out For Traps
Consolidating your debt isn’t a magical fix.
There are a number of mistakes people make when they are considering this step, usually because they are in a dire situation and are fairly desperate for a solution. So, if this is something you think you need to do, first ensure that you figure out what put you into debt in the first place. What problems did you face? What decisions or habits contributed to your current predicament?
Once you have a better understanding of what you put you in this position you need to make sure you watch out for the following mistakes that people make while trying to solve their debt with consolidation:
- People feel relieved and start spending again too soon
- People borrow against their home or business and then can’t afford repayments. This can actually lead to losing your home or business and/ bankruptcy
- People fail to plan for after the consolidation.
- Know The Risks
As well as the possible loss of assets or a false sense of financial security that can occur when you consolidate your debt, there are several other risk factors to look out for. Unfortunately, there are a lot of ‘experts’ and businesses that are in this line of work for a quick buck and don’t care if you have a good deal or if you can afford the repayments. This is referred to as equity stripping and lands a lot of people in far deeper debt than they began with.
- Do Plenty of Research
The surest way to avoid any of the problems mentioned above is to do lots and lots of research. There are few things you should take as seriously as your finance. So, talk to as many people as you can about your options, ask advice from people who may have been in similar situations and compare as many consolidation plans as possible.
Debt consolidation could be the start of the solution to your debt and make staying on top of your finances much easier. However, it is not without risk, so get informed and be aware.