Make a Debt Consolidation Loan Part of Your 2017 Strategy
With the new year come resolutions to improve certain parts of our lives that could use some work. For a lot of people, New Year's resolutions include financial decisions. If you're looking to get your financial house in order in 2017, you might want to consider a debt consolidation loan as part of your strategy. Debt consolidation can do amazing things if implemented wisely.
For the record, the practice of debt consolidation is one of paying off debt faster and less expensively by consolidating high-interest debt into a loan with a lower interest rate and better terms. The principle is based on an understanding of the total cost of borrowing.
You Pay to Borrow Money
Borrowing money meets financing needs when you don't have the cash on hand. For lenders, it's a great way of making a profit. Lenders make money by charging borrowers both interest and a series of fees. This is true whether you're talking about a mortgage, a car loan, a secured loan, or even a credit card.
What a lot of people fail to take into account is the fact that interest isn't the only thing you pay for the privilege of borrowing. Those extra fees and charges also add to the total cost of borrowing. So every time you borrow, it is costing you money to do so.
The whole point of debt consolidation is to spend as little as possible to pay off what you already owe. A good debt consolidation loan is key to a successful consolidation strategy.
Consolidating debts in excess of Â£5,000 generally requires a secured loan. If you have equity in your home, a secured loan should be relatively easy to get. You could borrow a certain percentage of your equity and use the cash to pay off your high-interest credit cards and any other debt you might have. You would then be left with a single monthly payment that would be lower than the combined payments you are now making.
Other Financial Strategies for 2017
A debt consolidation loan should be part of your 2017 financial strategy if you're looking to get an out-of-order financial house back into order. But a loan is just one tool. By itself, it's not likely to drastically change your financial position for the long term. It needs to be combined with several additional strategies, including:
- Maintaining a Budget â?? If you don't yet have a budget in place, that needs to change. A budget is the single most effective tool consumers have to keep their finances under control.
- Live as a Minimalist â?? Another good strategy for 2017 is to adopt a minimalist mindset. This mindset is one that says you are going to live as minimally as possible. For example, you're not going to buy new furniture simply because you've chosen to update your look. Instead, you're going to hold on to your current furniture until it's no longer usable due to its condition.
- Save and Invest â?? One of the best benefits that come from a minimalist mindset is the ability to save and invest. Once you stop spending on things you don't need, you'll have extra income you can put away for emergencies and future needs. That can only be good for your financial position.
The new year is now here. If one of your 2017 resolutions is to get your financial house in order, we hope the strategies listed here will be beneficial to you. As always, be sure to shop around before you settle on a debt consolidation loan.
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