Eliminating debts with discipline and routine is a crucial part of financial health. Especially when multiple loans start snowballing, it can be exceedingly difficult to keep track of each account and manage cash payments individually. In such cases, a debt consolidation loan can help you streamline the repayment. In this strategy, all your borrowings are rolled into a single account. You may need to pay interest every month on this consolidated amount.
This removes the need to pay off all your debts individually, and all you need to do is pay through EMI for one loan each month. However, simply consolidating your debt does not mean that you’ll be able to pay it off easily.
How can you use a debt management plan?
You should have a solid debt management plan to aid you through the process so that you can keep your credit score high and avoid penalties. Don’t worry, as I will help you.
Apply for a debt management plan
One of the best ways to manage your loans is to consult a financial or credit counselor. You can find them through your debt consolidation program. This is basically the process in which you strategize your budget and finances so that you can pay off your debt early. If accepted into the plan, you can make one EMI to the debt management company, which can, in turn, pay your creditors.
To qualify for debt management plans, you must have a good credit worth to begin with. Further, you should actually have the provision and the money to pay back the loan. If you are unsure of whether you will be able to pay back the full amount, your debt management company might try and negotiate with the creditors for reduced rates.
Calculate your total debt
Simply depending on your credit counselor is not enough. You must figure out exactly how much you owe and then find a comfortable budgeting strategy to support your repayment. This includes the total money owed, the interest rate, the EMI amount, and the dates you must pay. This is a preliminary budgeting step that despite its simplicity can go a long way in preventing penalties and defaults.
Use budgeting tools
A pen is mightier than a sword, but it isn’t everything when it comes to budgeting. You need more accuracy and categorization skills to plan out your payment. Banking apps generally have calculator tools that help you organize, calculate, and schedule your payments on due dates. This is crucial to get a bird’s eye view of the total loan amount to be repaid in the given tenure and keep your head above water.
Find a budgeting strategy and stick through with it
Suppose you’ve had difficulty budgeting and planning your EMI and debt repayment plans. As mentioned earlier, you can seek out credit counselors who provide you with financial strategies to help you pay back your loans. For instance, you can have a 50/30/20 plan and use this method for the purpose of your repayment. This is the time to show a little self-restraint and prevent yourself from splurging unnecessarily.
Some counseling services may negotiate with your creditors to help negotiate lower interest rates and waive any fees. However, be warned here because there are several debt settlement scammers that go around posing as debt consolidators. In negotiations, always ensure that the credit counselors are being transparent with critical discussions and negotiations.
Summing up
Hopefully, the above strategies will be useful for you in conceptualizing how you can go about your debt management strategy. The aim is always to get rid of debt as early as possible and not fall into any more cycles. Wishing you well on your road to debt freedom!
