It’s very easy to get into debt, we’ve all been there at some time or another. It’s also a slippery slope, debt can lead to more debt as we juggle our various commitments and try to keep one debtor satisfied as we get in deeper with another. Sometimes this is all we can do. Life costs money, we don’t even need to have expensive taste for this to be the case. It’s also worth pointing out that debt is necessary. Nobody is advocating getting into crippling debt, but sometimes we want or need certain things and credit is the only realistic way we can achieve it.
Not all of us are lucky enough to be able to furnish our new homes, buy a new car or have the wedding and honeymoon we’ve always dreamt of without borrowing money. After all, we only live once. Frugality is absolutely a virtue but there’s a time and a place for it. The truth is we need balance in our lives, it’s good to be a little bit frugal and a little bit extravagant on occasion. It’s normal. The trick is not to let our debt get out of control or in so many different places that we run lose track of it.
Debt Is Normal
In his modern age it’s normal and quite honestly expected to have certain debts. For many families, the debt of a mortgage can be preferable to renting our homes from a private landlord. In this situation we’re often paying the bank for the privilege of having a mortgage with them, but at least every other penny we pay back is being invested into our home. One day we may be able to sell such an investment for a profit, making the debt we originally accrued absolutely worth it in the long run.
Other debt such as credit cards and store cards can also be sensible as long as we don’t overindulge and let it get out of control. Having these items and steadily paying them off over time is actually an effective way to build up one’s credit rating in the first place. Something that one day may come in handy should we need to borrow a large amount of money to start a business or purchase some property.
Like we said however, debt can become a slippery slope. It’s easy to forget how much we owe when we owe lots of small amounts to various different places. A little bit of credit here, and a little bit of debt here can soon add up. Before we know it, our debt has crept up on us and is no longer as easy to maintain and pay back as it once was. Sometimes the time comes when we need to get control of the situation.
Taking Back Control
One of the most effective and celebrated methods to get control of our debt is to consolidate it into one place. This usually means taking out a loan with the intention to pay back every other debtor, making this our one and only loan going forward. To many people this is a lifeline, it allows them to finally get rid of all the different loans and credit cards that they may already have, then just pay back one debtor every month instead of several. It can also mean paying a lot less interest to various debtors in the long run too.
For example, an individual may owe the following:
- $1000 on their car
- $200 on a clothing store card
- $400 left to pay off on their wedding
- $100 left to pay from their last holiday
- $300 on a credit card
All of this could amount to $2000 worth of debt, which for many of us is in fact normal. Each of the figures above is for something fairly common, something which many of us would arrange credit for instead of buying outright. The problem is the various interest rates that may be associated with each of these. Chances are they range wildly from one debt to another, some being a rather small and manageable interest rate, where others will be high. Perhaps even ridiculously high.
How could a consolidation loan help?
A consolidation loan could move this debt into one place and under one sole umbrella of debt. This would allow the owner of the debt to only pay one debtor a month instead of five. Meaning, realistically they will also be paying only one rate of interest and not five different varying rates. Essentially, by consolidating their debt by using one single loan, they have effectively reduced their overall debt by a significant amount by simply moving it to another place. Not only is this easier to manage, but they’ve also more than likely saved themselves a lot of money too.
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Is a debt consolidation loan for me?
Whether or not a debt consolidation loan is for you or not depends on you, and how much you owe. It also depends on who you may owe the money too. Some debtors are more reasonable than others and some rates of interest (otherwise known as an APR) are also more favourable than others. Chances are your present debts are as good as they can get. Low payments and low interest also, but on other occasions this may not be true. It may depend how long ago they were taken out.
If you have multiple debtors and direct debits going out a month then a consolidation loan may be an excellent idea. Unlike your current debt, that still may hold a fixed interest rate from whenever it was taken out, a consolidation loan may have a much more up to date rate of interest and therefore be more flexible and easier for monthly payments to be met. This could be true of several different debts, meaning in this situation a consolidation loan would almost certainly be worth looking into.
We would recommend taking stock of all of your debts paying particular attention to the current rate of interest you’re paying. After this compare this figure with the various consolidation loans on the market today. You may save yourself a tidy sum in the long term.