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Consolidating Your Debts: Keep It Simple

by Olufisayo
Consolidating Your Debts

What’s the key word you should focus on when you want to consolidate your debts?

The answer to that question is very simple.

No, really, the answer is “simplicity.” This should be your goal when you make the decision to change a number of small debt payments into one payment, as a new loan. If you keep the process from becoming complicated, you’re likely to stay with the plan because it will be comfortable to do so.

Consolidating Your Debts

It Just Makes Sense

That is, in a nutshell, the key to consolidating debts. Why? Because it’s the logical thing to do when making financial decisions. You should also make every effort to keep your emotions out of the decision, making your choice based on your limits and your ability to pay. Find a point of balance where you can steadily retire your debts without pushing so hard you give up completely. Do this, and stay focused. You’ll soon be closing in on an important goal.

One mistake you don’t want to make is to choose the first solution, a sort of one-size-fits-all, then get into difficulty because the plan doesn’t fit your situation. You’d be wise to look very closely at the structure of the program and try to put yourself into that scene. If, at any point, you find yourself saying, “I can’t live with that,” you need to take a different path. There’s a delicate balance between logic and emotion, so don’t let consolidation lead to even more difficult circumstances.

Interest Rates

Some individuals will look at their finances and immediately think they’re drowning in debt. But some of them are wrong about this line of thought. These people allow emotions such as fear to take over, when a calm assessment of the numbers might show that they can make major changes by consolidating your debts. Understanding your interest rates and how they affect the total amount you pay is sometimes a good place to start. But don’t let this factor, or any other, complicate the idea for you.

Consolidation is a simple concept that many people fail to understand clearly because they make it complex. In basic terms, you’ll get a new loan or qualify for a new credit card, with the total amount used to pay off other debts. Sometimes you can do this with a lower interest rate, though the loan may be spread out over a longer period of time. Essentially, you make one payment at a different rate of interest, with the goal of paying off your debt faster.

Total of All Debts

You will pay a debt consolidation company or another lender the amount equal to all your debts, with a monthly payment that will be applied to the principal, interest, and fees. If you can get a lower interest rate, this may be a great option for you. Another mistake you don’t want to make is to confuse debt management with debt consolidation. What you need is a lender or company that will take on your total debt, based on your agreement to make regular payments according to the contract. It’s just that simple.

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