Is It Time For Debt Consolidation?

Before you consider debt consolidation, from a professional company, here are two methods you can try on your own first. But before you start, write down everything you owe. These would include your mortgage payments, your credit card debt, store card debt, hire purchase, car payments, and everything else you owe. Write down the total amount owed on one page and your monthly minimum payments on each item. Make a note of the amount of interest you are being charged on each one. Now write down all your income from all sources, that is, your net income, after tax has been deducted. The next step is your monthly living costs; food, clothing, medical expenses, school expenses, transport. This is where you have to be totally ruthless and prioritize realistically. You have to set aside an amount for food and living costs. Every essential has to be covered, but you have to distinguish between what is ‘essential’ and what is just ‘want to have’. Then you need to put an amount each month, however small, into an emergency fund, not to be touched except in genuine emergency. Deduct the total minimum amount of payments plus living essentials from the total income and the amount that is left over is what you have to work with to move the debt load. If your income does not cover the expenditure, then you are in fact bankrupt. This calls for something really radical, such as selling the automobile, selling the house and buying a smaller one or renting, or taking on an extra job. If you don’t do one of these, you will be forced to declare bankruptcy. Trying to get further credit will only make things worse. To return to the two methods most likely to help you get out of debt quickest, they are suggested by two of today’s top financial experts, Suze Orman and Dave Ramsay: Dave Ramsay is famous for his ‘snowball’ method: He suggests you list all your debts in ascending order, according to the amounts you owe. Each month, after paying the required minimum on each debt, you should then put every cent left over into the smallest debt. As soon as this debt is paid off, take the total amount freed up each month, and put that into the next smallest debt. So you repeat the process. This way does not save the most amount of interest, but it is extremely confidence boosting and gives you a sense of control. As you go, the payments of debt will accelerate and the load will get easier, quicker. If you want to save paying as much interest as possible, Suze Orman will help you with this advice: It is very similar to the previous advice. Pay your minimum required monthly payments, but then try and add a small amount above this, even if it is only as little as ten dollars on each debt. Remember, this extra little bit comes off the actual amount owed, and does not disappear in interest as much of the minimum payment does. Now you begin to concentrate the payment, focused on one card or debt, just as before, only, instead of picking out the smallest amount owing, pick out the card that is charging you the highest interest and concentrate on that. This way, each month you will be slightly reducing the amount of interest you are paying, slowly at first, but after a while, faster and faster. When you have finally succeeded to get your debt under control, try in future to watch carefully each month that your expenditures don’t exceed your income. This is how most card debt starts in the first place.

A good way to save money each month when you have multiple loans is to combine them using debt consolidation loans. The lowest interest loan like this is a debt consolidation home loan.