A lot of people who are looking to get out of debt seemingly pass over consolidating their debt. Many think that it will not save them a lot of money, or that it will just cause more problems than it is worth. But, the truth is, consolidating your debt will actually save you a lot of money!
There is no way to give a concrete amount of money that consolidating your debt will save you, because it depends on your specific interest rates that are offered to you. This will depend on where you go to consolidate your debt and what your history is.
But, in many cases, you can have your interest rate cut in have, or even more, if you go through the debt consolidation process. There have been cased of people paying 19.5% on their credit cards consolidating all their debt and paying less than 6% overall. That is less than 1/3rd of what they were paying before. Once you do all the math, you will see that the actual saving is huge.
Also, consolidating your debt is not that difficult, especially if you already own your home. You should not be intimidated by this process.
Consolidating your debt will save you a lot of money in the long run. If you are stuck with high interest rates and are having trouble paying off your debts, you should really consider consolidating your debts and taking advantage of lowered interest rates. It is definitely worth it.
This is the true story of a young man who we will call David and his debt problems.
His first encounter with credit was when he was 18 years old and was faced with a dental bill of £2,500. The only way he could pay it was on a high interest credit card but then sensibly he took out a loan with a much lower interest rate in order to repay the card.
He then started using his credit card again and soon he had reached his credit limit. He took out more cards and before long had eleven of them and the repayments took most of his salary, thus in order to live he had to take out even more credit.
Unsurprisingly, there eventually came a time when he could obtain no further credit and he said that the experience had been the feeling that his world had come to an end. He fell into arrears and he was worried about losing his house and all his possessions
He contacted a debt management organisation which set up a debt management plan for him in which he repaid £410 a month and managed to get his creditors off his back. He kept up the plan for two years during which time he was living with his parents even though by then he was 34.
Subsequently he got married and moved into a rented flat. They were planning children, so he decided he needed to end his debts once and for all be declaring himself bankrupt. He said that it had been very tough to go through with it. He still owed £44,000. He and his wife gathered together all the statements and paperwork which he said had filled a rucksack. He stopped making repayments on his debts and used the cash to fund a bankruptcy application.
He turned up at court in the morning and met another couple in a similar position. He filled in his forms and handed these over to the clerk along with his fee of £450. He was called to the Judge’s office where there was the Judge and the clerk. He was asked to explain why he owed so much money yet had no assets which he did. His application was granted. The next step was to visit the official receiver where he was told that all of his assets belonged to the state.
He was fortunate in that he was discharged after eight months, but the whole situation could have been avoided if he had taken action earlier. If any of his experiences are familiar, then you can find sympathetic help an advice at www.gregorypennington.com.
A high percentage of people who are in a sufficient amount of debt seem hopeless in the process they are going through. They are convinced that they will be in debt for a large portion of their life and that all the payments they are making are not really reducing the principle amount of their loans or credit card balances. But, if they were a little smarter about the whole process, they would see that it is possible to reduce debt in a short period of time.
The worst thing you can do, though, is just keep on doing what you have been doing. The people that pay of their debts the fastest make changes to their lives and do everything they can to reduce their debt as much as possible. They make sacrifices so they can put a large portion of their paycheck on their debt, they consolidate their debt, and they stick to budgets so none of their money is getting wasted on useless things. To reduce debt in a short period of time, you need to attack it head on – you cant deal with it passively.
If you are smart about the whole process and are willing to go the extra mile, you can get rid of debt quickly. But, if you don’t make any changes and keep on doing the same things you have been doing, you will waste a lot of money paying interest and will stay in debt a lot longer than you should.
Posted in Debt on 04. May, 2010
Sometimes, you need to go into debt. There is nothing wrong with going into debt for the right reasons. But, too many people go into debt for the wrong reasons. Things like luxury cars, vacations and borrowing to support your social life are all things that should be avoided. But, any of the following things are generally acceptable uses of borrowed money.
Homes
Most people go into debt to purchase a home. A house isn’t a depreciating asset, so in the end, it is actually a profitable move if the value of your house appreciates. After all, you will always need a place to live, so investing in a home instead of throwing money away on rent is a good idea.
Starting A Business
Starting a business is an acceptable use of debt. As long as you have everything planned and are willing to put the work in, it will pay dividends in the long run.
Education
Finally, going into debt to get an education for you or your kids is never a bad thing. An education is an investment in yourself or your kids, and once they get a diploma, they will be able to earn more money in the long run. It is never a bad idea to go into debt to support someone’s education.
There are still a few things that are acceptable to go into debt for. Any of the above reasons is something that you should not worry about going into debt for.
Paying off debt seems like a pretty simple concept – you save money and you pay your bills. But, in reality, it is not that simple, and a lot of people have trouble paying off their debts. Here are some of the main reasons they have trouble doing this.
Lack of discipline
Many people can’t stick to a budget and rather go out and have fun instead of saving money and paying off their debt. With a little sacrifice, people can pay off their debts pretty quickly. But, people don’t have the discipline to do this.
They don’t make enough money
A lot of people just don’t make enough money to live their daily lives and pay off their debts. It is often the case that debt spirals out of control and the person who has it doesn’t have the required income to pay it off in a timely manner. This spirals out of control due to interest, and before long, they have to claim bankruptcy.
They don’t plan ahead
Finally, very few people plan ahead in terms of finances. Before they know it, they have accumulated more debt due to unexpected expenses when they should have been paying of their debt. This is more common than most people think.
Paying off debt is not as hard as most people make it out to be. If you just plan ahead and don’t let your debt spiral out of control in the first place, you won’t have anything to worry about.
