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The following is a guest post. Enjoy!
MyPersonalFinanceJourney.com has written a lot about credit card debt and how to effectively save for emergencies and pay off your debts efficiently. For some people, however, you might already be past the point of even knowing where to start with tackling your overwhelming debt load.
Debt issues trigger strong emotional responses in all of us, and feelings of guilt, helplessness, worthlessness, frustration, anger, and betrayal are all normal. For this reason, it might be difficult to admit you need outside help, but working with a professional to help you get out of debt could be the best decision you ever make.
What Are Your Options?
If you’ve never dealt with this type of debt load before, you might assume that bankruptcy is your only option. The idea of wiping the slate clean appeals to us when we’re at our most frustrated (who wouldn’t want a do-over at some point in their lives?).
The truth is that bankruptcy should only ever be considered as a very last resort. The long-term effects on your financial situation could set your dreams of a solid foundation going into retirement back years and years.
You might be able to find counseling to help you organize your debts, talk to your creditors, and come up with a payback plan, but it can be difficult to find someone who will stay with you as you go through the entire process.
How Does A Debt Consolidation Loan Work?
Part of the reason you’re struggling with debt is that there are just too many different bills to deal with. Every few days, it’s a credit card bill, a car payment, insurance, a medical bill, or a utility bill. It’s so easy to get behind and have one check bounce, creating a domino effect of missed payments.
With a debt consolidation loan, you borrow the amount you owe on all of your debts and pay everything off at once. You’re left with a single loan, which is much easier to budget for and remember.
On top of the single payment, you may also end up with a lower interest rate. Some debts you have (credit cards especially) have outrageous interest rates, and your debt consolidation loan could potentially end up being cheaper.
The real key to this type of loan is having a lower monthly payment. If you were constantly struggling before, you’ll now be able to determine a monthly payment that fits your budget and income. You’ll stop living right on the edge and now have the opportunity to build up a small emergency fund and get back on track.
A small word of warning: lowering your monthly payment sounds great, but you should also remember that any reduction in payments means it will take that much longer to get out of debt.
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