Debt Consolidation Loans

Debt…. We all have dreaded debt. It can be daunting, dismaying and disheartening in our lives.
Owing money is costly and can create obstacles for us to reach our financial goals.
We all want to get rid of debt.

Are you swamped with too many outstanding payments? If that is the case, this is a must-read for you!

What is Debt Consolidation?

Debt consolidation is the process of merging multiple debts into one, commonly with a debt consolidation loan. You could save money if you are able to get a decent interest rate on your debt consolidation loan. This could simplify the number of payments you make per month. Once the lenders approve you after checking for the required qualifications, you’ll receive the money from your loan in a lump sum. You can then use this lump sum to pay off each of your credit cards. Now, you’ll only have to worry about making one monthly payment on time.

Debt consolidation can simplify your finances and roll your multiple loans into one single payment. Making it simple can be a relieving thing amidst all the chaos. That said, you are not free of financial responsibilities with a consolidation loan. It simply merges your individual debts into one. The goal is to make your financial hurdles easier to manage and to, potentially, lower your total interest payments.

When is a consolidation loan a good idea?

If you’re dealing with a manageable amount of debt but just feeling overwhelmed by the number of creditors, a consolidation loan may be a good option. Opting for a debt consolidation loan is a good idea if your debt doesn’t exceed 50% of your income.

You have to make critical changes to how you spend and save to get out of the financial damage. If you’re not sure how you accumulated so much debt in the first place, consolidating won’t do anything to change your spending behaviour. It also won’t stop you from accumulating more liabilities in the future. Debt consolidation can, however, be a step in the right direction.

For many people, consolidation reveals a light at the end of the tunnel. If you take a loan with a three-year term, you know it will be paid off in three years — assuming you make your payments on time and manage your spending. On the other hand, making minimum payments on credit cards could mean months or years before they’re paid off, all while accruing more interest than the initial principal. Consolidation loans combined with a debt repayment plan or credit counselling can be a smart way to pay off of your debt at a fraction of their original cost. If it may be a good time to strike, pay it all off, and walk away from the deluge.

Consider these indicators of when a Consolidation loan works well:

•  Your total debt doesn’t exceed 50% of your income
•  Your cash flow consistently covers payments toward your borrowings
•  You have a plan to prevent running up a financial debenture again
•  You’ve found a decent rate of interest for the consolidation loan.

What to be cautious of in a consolidation loan?

The risk of running up new debt before the consolidated debt is paid off is one of the biggest pitfalls of a consolidation loan. When you finish paying off credit cards with a consolidation loan, don’t be tempted to use the credit cards with their newly free credit limits.

If your indebted borrowings exceed 50% of your income, debt consolidation alone may not be enough to help whittle down your total deficit. So, make sure your budget and spending are on the check.

Debt consolidation may be a great relief for most people but having any kind of financial baggage means you are tied to a creditor. You can’t put your money in your own pocket. It is until meeting your obligation. Avoid getting into the financial situation where you might have to do this all over again.

BHM Financial Group

Click here now to get information on the consolidation loans offered by BHM Financial Group across Canada.

BHM Financial Group offers a secured loan up to $15,000 towards consolidation loan against collateral.

 

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