There are many pitfalls in debt consolidation loan. This article is not meant to bash this debt solution. In fact, we’re here to help you make sure that you avoid all those pitfalls. If you got yourself in debt, that means you are not in the best position to manage a huge amount of money.
Debt consolidation loan is all about getting a huge fund to help you pay off what you owe. The idea is to combine your debts by paying off the others with this one loan. That will leave you with only one debt to deal with.
One of the temptations that you will encounter in this debt relief program is when you get that loan approval. Since it is a big amount some people are tempted to use it on something else – at least a part of it. This is not right. So to help you override this feeling, here are the things that you must do once you get the approval on your loan.
Before you can even think about the temptation of using the loan to buy something expensive, go to your bank and pay off the debts that you intended to close. Whether they are credit card companies or lenders, you should settle what you owe immediately.
But after that, there are a couple of things that you have to do.
First of all, keep your credit cards. This is one of the temptations that you have to avoid. Once you have paid off your cards, they will all have zero balances. You want to keep yourself from spending through these cards and thus increase your debt.
Next is to arrange a payment plan. This should have been done before you applied for the loan. However, there is no harm if you haven’t. But you have to do it now. Start with your budget plan. Indicate your income and expenses. When you are plotting your expenses, identify the wants and the needs. You need to rank your priority expenses to ensure that you are putting money into your priority list. Make sure this single debt payment is included in your budget so you will never forget to pay it. Put up reminders that will ensure this payment will always be met.
Lastly, you may want to build up your reserve fund. Growing your savings is a very important part of staying out of debt. Sometimes, people do all the right decisions when emergency strikes, they are simply not prepared for it. Any immediate and sudden expense will have to be borrowed if you do not have the savings to finances it.
Increasing your income maybe a good idea to help make this possible. If you have just enough for your expenses and your debt payment, then you need to do something to increase your income. The option of cutting back on expenses is there but that is only limited. Increasing your earning may be more appropriate to quickly grow your savings.
Follow these steps and you are sure to make debt consolidation loan a success in your financial life.