consolidate debt finance budget

Consolidate Your Debts In 5 Easy Steps

With the cost of living rising, for small business owners, it can be easy to fall into a never ending vortex of credit card repayments, reminders for bills or mortgage instalments as well as keeping on top of every day costs, such as grocery shopping, and not forgetting the unplanned emergencies (yeah, we’ve all been there!) This can undoubtedly lead many individuals into applying for further loans in order to make up for the shortfall in both their personal and business finances. However, what they don’t realise is that this way of living can quickly turn into a vicious cycle.

Take the first step to break free

So, how can one acquire the help to pay off their debts, stay up to date with their bills and be able to live a stress free life with little worry about unpaid repayments? One of the major and traditional methods for the consolidation of debts is all about taking a large sum of loan from a bank and further using that loan for paying off some smaller debts.  This method is effective in paying debts quickly. However, the loan you would be carrying would have a high-interest rate too. Therefore, it’s essential to consider a few things before opting for this which will be discussed further.

Make a list & calculate your total

Consider the debts you wish to consolidate, for both your personal and business needs, and mention the total amount which you owe alongside the monthly payment due date and the paid interest rate amount. Finally calculate the total of all the debts you owe and note this down. This step is important to give you a clear image in your mind about the amount you need to borrow with a debt consolidation loan.

Compare your monthly payments

In order to give you an idea of the comparison between the debt you owe now and the debt you will receive when you apply for and receive a debt consolidation loan, add up all of the monthly repayments which you have currently made for every single debt and note down the amount. Will a debt consolidation loan reduce your monthly repayments? If so, it’s time to start looking at potential loans and providers.

Research loans and approach providers

With so many loan options available on the market, it’s important to thoroughly investigate the different types and various providers. For personal needs, it’s possible to get a personal loan with a 0% interest rate if you want to borrow cheaply. For business needs, you can opt for either a secured or unsecured business loan, as well as apply for a government backed recovery loan specifically created for businesses affected by the pandemic. The main difference between secured and unsecured loans are that the former requires a personal asset to be offered as collateral in case you can’t pay the loan back, whilst the latter allows you to borrow money outright. Approach various banks, online lending providers or credit unions to compare their offers and be sure to ask them about the number of monthly payments as well as any interest rate charges.

Make a decision

You’ve finally opted for a loan and provider you’re happy with – congratulations, you can start living a life with less worry about your finances. On the other hand, if you still feel like you’re struggling to find a suitable loan option and are unable to afford your debt repayments, research into a DRO or bankruptcy as a last resort.

Until next time.

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