Debt consolidation, especially the one involving loans should be done with a debt payment plan. This is important because unlike debt management, you are working on your credits alone. There is no credit counselor helping you manage your monthly payments. In fact, even with the presence of an expert, they still create a debt management plan – which is similar to the debt payment plan.
Implementing your own debt relief program is tough because getting yourself in debt means you are not the best person to handle finances. You have a lot to learn and doing it alone may be tougher than you think. But what you lack in expertise can be compensated by adequate preparation. This preparation literally means creating a plan that will help you monitor your monthly contributions. The best way to do this is through a debt payment plan.
Before you apply for a loan, you need to know the problem that you will solve and your financial capabilities. You need to map out a payment plan that will allow you to pay off this new credit account. You have to identify the accounts that will be paid by the money you will borrow and how you will ensure that they will no longer incur any more debt.
The debt payment plan is comprised of two smaller plans: budget and payment schedule.
Creating a budget is simple enough. It just involves detailing your income and your expenses. The key to input the smallest amount of your income for the last 6 months and to provide the complete and detailed list of where you spend it on. These are important because you want to make sure that you will never fall short. When you have both, you need to get the difference so you know how much is left of your income after the expenses had been paid off. This is called the disposable income.
The disposable income will play a big role in your payment schedule. This will detail how much will be put into your loan, or other debts that were not covered in your debt consolidation loan. You will indicate when and how much should be sent to your lender. This is to ensure that you will never miss out on a payment.
Being organized about your debt relief program is very important if you want to keep yourself from failing. There is no one else who will accomplish this but you. It is better to be as detailed as you can – especially when you are listing your expenses.
Once you have completed your debt payment plan, make a commitment to follow it. Regardless of how perfect your plan may be, it will be useless if you fail to stick to it.
On a last note, make sure that you allocate funds for your savings. One of the best ways to stay out of debt is to have an emergency fund that you can use when your income is suddenly compromised. Being prepared is more vital than ever – at least that is what the recent recession should have taught you.