Do You Need a
Debt Consolidation Loan?

Consider all your options before applying
for a debt consolidation loan

Everyone has difficulty making monthly payments from time to time, but that doesn't mean you need a debt consolidation loan. You need to review your finances in detail before you make a choice to borrow the money to consolidate your debt.

Before deciding on taking out a debt consolidation loan, it's essential to make sure there is no other alternative since you will also be extending the time it will take you to repay those debts.

Are You Able to Make Some Adjustments in Your Budget

Before you take out a debt consolidation loan, you must be certain that you are making a wise decision. Sometimes making a few concessions in the way you spend your money can prevent the need for consolidating. Though there is certainly a need for some people to obtain financing via a debt consolidation loan in order to lower the monthly payments on their debts, you want to make certain there is no other way.

In most cases consolidating your debt means taking a loan against the equity in your house, so you want to avoid that step if at all possible. The key is choosing the course of action that is right for you and your family, thus reviewing all of your debt before you make a decision is the wisest move. Some of the things you may want to review before considering a debt consolidation loan include the following:

• Can I make any cuts in the way I spend my money?
• Are there some areas in my budget that I need to trim (i.e. less eating out, buy cheaper clothing, food, personal care products, and take measure to reduce heating and/or cooling bills)?
• Can I reduce commuting costs by using public transportation?
• Is your wife's job adding more costs than income?
• If you have two cars and your spouse doesn't work outside the home, weigh the necessity of that second car.
• If you're paying someone to help clean your house, consider doing it yourself and saving the money.

If you make all of the concessions you can and are struggling with your loan payments, then you are ready to make the choice to consolidate your debts.

Get Rid of Your Credit Cards

One of the first things you should do when you take out a debt consolidation loan is to cut up and throw away your credit cards. One of the mistakes many people make is consolidating all their bills and then making charges on their credit cards that puts them into the same situation they were If you need a credit card because of your job (travel with reimbursable expenses), lock it up when you don't need it.

Consolidate Debts with the Highest Balances and Interest

If you are not able to obtain a debt consolidation loan to cover all of your debt, begin with those that have the highest interest rate and balances. If you have loans that will be paid off within a year, you should be able to take care of those without consolidating. The purpose is to reduce the payments on those loans that will strain your budget the most.

Of course, if the ones that are due to be paid off in a year or less have high monthly payments, you may need to re-evaluate those payments to see if you can continue to make the remaining payments or if they need to consolidate those with your other debts.

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