Debt consolidation loans may be an effective debt solution but you need to realize that it has a high fall out rate. That does not mean to say the whole concept is flawed. There have been success stories but unfortunately, these do not make up the majority.
If you think about it, the reason why debt consolidation loans seem to be unable to help with debt is because of how consumers treat it as a debt relief option. Sometimes people are so focused on paying off their debts and once they get the loan approval that will pay it off, they start to relax. They are under the impression that the debt problem is over because the confusing multiple bills are now gone and replaced by one big loan. Also, if the debts paid off are mostly credit cards, it will be very tempting to use them again because they are all on zero balance once more.
These are only a few of the reason why financial experts dislike debt consolidation loans. You need to realize that it all boils down to how you react to the loan approval. Everything that leads from there will either be a success of failure depending on how you act.
So how should you act once your debt consolidation loan is approved?
First of all, you want to pay off your debts immediately. Don’t make excuses to pay only a portion of the debt and then spend it on something else. Put everything into your debt payments as planned.
Once you have paid off all your dues you have to do something about your credit cards. You can either close them off except for one, or you can keep them in a place where you will not be able to easily access them.
Another task that you have to accomplish after you got your loan approval is to map out how you will pay off this new debt. No matter how good it feels to completely pay off your credit card debts, you need to keep in mind that you haven’t solved it yet. You merely shifted your debts around but you still have to pay them off.
Create a debt payment plan and make sure that you will stick to it. You can also create a budget plan or revise it if you already have one. Make sure both your debt payment plan is budget coincides with each other. Put in your budget the amount indicated in the other plan so you don’t make a mistake of forgetting any payment. This is very important for your credit score too. As you pay off this loan diligently, you can expect that your core will rise steadily.
Lastly, you should put aside an amount every month so you can grow your reserve fund. Saving should be combined with your debt payment efforts because it is one of the most effective ways of keeping you from another debt situation.
Opting for debt consolidation loans will bring you towards financial freedom but you need to be very cautious about how you will manage it once you get the loan approved. In the end, it’s still about how you make smart financial decisions.