Using debt consolidation for financial control

DEBT CONSOLIDATION

You don't need to own property to be able to consolidate your loans.

Consolidating loans with your existing mortgage is very effective if you owe large amount of money on your credit cards, personal loans, car loans, etc. See the Example-1 on our home page.

Control your finances with debt consolidation

The majority of adults have a loan, credit card or some other kind of debt. Owing money is an integral part of today's society. Some people are good with their debt management, however the vast majority have problems managing their finances.

The difficulties usually arise when people borrow more money than they are able to easily handle, or when unexpected financial outgoings break their existing payment plans. Relationship problems, health problems and associated bills and loss of employment also impact on peoples ability to stay on top of their financial obligations. The above reasons account for more than 95% of debt problems.

Even with a sound financial management it is possible to get into money trouble, however the risk is greatly reduced with good financial planning.

Before borrowing, one should asses his or her ability to service the debt. Do not borrow money if:

- your employment is not secure for the foreseeable future
- your health situation will prevent you paying your bills
- your relationship / marriage is at breaking point
- you are an impulsive shopper and don't really need the item or service you wish to buy

Having a large debt is a great burden for any person, financially and mentally. A new loan should not be taken at all if it can be avoided in the first place.

A few simple rules for debt consolidation can make a big difference to your pocket.
First, if you have large personal loans and credit card debt, and you have a mortgage with equity (equity means, you owe less on the mortgage than your house is worth) you should consolidate your other debt into your mortgage. As a mortgage will normally have the lowest interest rate, consolidating $20,000 - $30,000 of personal loans and credit card debt into the mortgage will save several hundreds of dollars per month. When consolidated, a debt of more than $30,000 may save more than $1,000 per month.

Consolidating your loans into a new personal loan over a longer period of time will reduce your monthly payments. There is a difference between a loan with a 3 year repayment period and a 7 year repayment period. A loan with a 3 year repayment period will save you money in interest, your total payment at the end of the loan will be lower than for a 7 year loan repayment period. However the monthly repayments for the 3 year loan will be higher than for the 7 year loan period. You have to decide what is more important to you - firstly paying off the loan in a shorter period of time with higher monthly repayments and saving money in this way, or secondly having lower monthly repayments with a higher total payoff figure.

New additional loans must be not taken to repay existing loans, this will just create more financial problems.