Debt consolidation helps you attend to your debts, especially if you’re juggling several at any one given time. As a business owner, you could employ a debt consolidation plan/scheme to be able to deal with only a single lender and make only one monthly repayment.
There are several benefits when you combine several or all of your debts into a single loan, which includes:
- Single repayment — One loan is a lot easier to manage and more convenient to attend to with only one lender with a single point of contact, which will also result in less paperwork
- Easier to budget for loan repayments — Instead of managing several separate repayments at various times of the month, you only need to make one monthly repayment, which is undeniably more convenient, requiring less time spent in doing the transaction
- Cash savings it can provide — You now have the potential to enjoy big savings on the monthly repayments and cut a considerable amount from your overall interest bill
- Possibility of saving on loan fees and charges as you pay the costs of one loan instead of paying several sets of ongoing fees
- Helps you reduce interest rates and monthly repayments, making you debt-free faster
When deciding on debt consolidation, take into account the following tips and considerations:
- Figure out which debt consolidation method is best for you — a method that is right for your budget and makes paying off your debt more convenient
- Speak with an expert that could help secure you the ideal deal — there is an extensive array of loan options or balance transfer schemes to help you save money (you’ll want what’s only best suited to your needs)
- Take a consistent and disciplined approach to repaying new debt — resist the urge to reload your old credit card with new purchases once it’s been paid out
- Making extra repayments will surely boost your interest savings and will make you debt-free faster
- Stick to a spending budget and avoid accumulating more debt
Debt consolidation loan vs. debt consolidation program
Some use the terms almost interchangeably, but there’s a difference between a debt consolidation loan and program. The first one is when you shift your debt(s) into a new loan. A program is a service and/or system to assist you in paying off your debts where they are.
Understanding the difference and choosing what’s best for you and your business situation cannot be overemphasised. It is only when you understand this and decide on the best approach can you effectively commence and manage your debt repayment process.
Begin debt consolidation by:
- Understanding your current repayments
- Categorising and prioritising debts
- Comparing debt consolidation options
- Designing a plan/scheme
- Making extra repayments
Understanding your current repayments
First things first: compile all your credit statements, loan statements, and bills. This will help you form a clearer picture of the scale of your debt levels, including details on what your business currently pays and owes, and other related considerations.
Categorising and prioritising debts
Which of your specific debts need immediate attention? Which ones need to be paid right away? Categorising and prioritising your debts will help you decide which ones need to be paid immediately and which ones can be put off. Also, it is okay to consolidate only a number of your debts, and not all of them. You can exclude other debts if you want to.
Comparing debt consolidation options
To identify the most suitable debt consolidation scheme that best fits your debt repayment needs, proceed by comparing the interest rates, charges, and terms and conditions of all potential debt consolidation options.
The first option you come across isn’t necessarily the best choice—so always be aware of your specific debt repayment needs and goals, and from here, decide on the best option/scheme for you.
Again, decide on whether you’ll go with a debt consolidation loan or a debt consolidation plan. You may also employ both to individual sets or groups of debts. And, sooner than later, you will figure out that one lender may suit your business situation more than others.
Designing a plan/scheme
Bear in mind that your plan should be manageable and ideal for your business situation and debt repayment needs and responsibilities. Working out a realistic budget is also practical since it helps ensure your debt consolidation repayment plan suits your current circumstances and even your immediate future ones.
After figuring out how much you need to pay per month, make sure you stick to your repayment plan until your debt is fully paid off. Follow through and be consistent with your repayments always.
Making extra repayments
Make additional repayments as of as you can, if your consolidation loan plan allows it. (There are those that don’t). Making extra repayments will help you pay off your debts faster. Make sure, however, that you don’t get charged fees for additional repayments, lump sum payments, or advanced repayments, as some loan schemes add said fees.
Bear in mind that debt consolidation may not be what’s best for you and your business circumstances, although it looks like it’s the perfect solution.
But after assessing and evaluating your current debt situation and concluding that consolidating your debts is the best option, proceed by strictly and consistently cutting down on your expenditure(s) to avoid getting into a similar debt situation in the future.
Always, the best debt solutions are prepared—and perfected—long before any serious threat or legal repercussion arises.