You might be thinking about debt consolidation if you find yourself in a situation where you are doing your best to pay off your debts but not really making much progress. Debt consolidation is a smart repayment plan with many benefits, but there are a few things to take into account.

You may only be able to make the minimum monthly payments if you manage several credit cards. When you make only the minimum payment, you will only cover your interest payment. As a result, you will get frustrated because your balance doesn’t actually decrease. You can use the effective strategy of debt consolidation to combine the debts and direct your income toward paying off that debt. The key is commitment, and you have to know how debt consolidation fits into your overall financial strategy.

Self-help Debt Consolidation

You might think about attempting to do your own debt consolidation. All things being equal, you can combine your credit card debts by transferring the amount to a single card (especially the one with the lowest interest rate). You will be able to focus your repayments on one account, and ensure that you pay more than the minimum required, so you can reduce your debt in an efficient way. In the meantime, don’t use the other cards to avoid incurring extra debt.

Debt Consolidation Loan

Obtaining a loan from your bank or working with a debt specialist are additional options for debt consolidation. With this option, you will obtain a single debt consolidation loan (from your bank) that will pay off all the multiple debts at once while you make monthly payments to pay off the new loan. A loan with an installment plan typically has interest rates that are lower than those of some credit cards. You will have more cash flow if you combine your debt payments into one loan with a lower interest rate, which will allow you to pay off your debt faster. Adopting this approach will promote living entirely on cash as well as aid in debt repayment.

Home Equity Loan for Consolidation

A home equity line of credit (HELOC) may be a practical method to consolidate debt if you are a homeowner with growing equity. These secured loans use the equity in your home as security and typically have interest rates that are slightly higher than the rates for mortgages but are still much lower than credit card interest rates.

Other things to Note

While a debt consolidation loan presents a great opportunity to get out of debt, there are some things to take into account in order to remain on track.

• Refrain from using credit. You’ll find yourself in a fresh financial issue if you start using multiple credit cards again. Reduce the risk by only having one card accessible for emergencies.
• Consolidation helps you get on time to pay off your debts, but it doesn’t reduce your debt or take it away. It’s one thing if you’ve racked up debt as a result of a singular life event that completely disrupted your finances. But in order to ensure that your debt load remains under control going forward, you’ll want to address those problems separately if you find yourself deeply in debt due to a gambling addiction, a spending addiction, or an inability to live within your means.
• While limiting your spending to cash is an appropriate decision, shutting out all of your credit accounts may not be favourable in the long run. To accomplish your financial objectives, it’s essential to gradually establish a strong credit history. This entails practicing responsible credit use, such as charging a modest amount and making on-time, complete payments on all balances each month.

Bottom Line

If you already have low credit due to your inability to make payments on time, you may not qualify for a low-interest debt consolidation loan. If this is your situation, you don’t need to worry. There are other options you can explore, such as reducing your debt by up to 80% and stopping all interest  immediately. Speak with one of our debt experts at EmpireOne Credit to see how you can benefit from this debt relief. You don’t have to go through this journey all by yourself; life becomes easy to live when we can get all the help we need to navigate through hard times. We can help, call us now at (416) 900-2324 or fill out the form on this page to get started. Debt-free feels good.