Debt Consolidation Lesson

If you have not managed your credit very well you may need to think about debt consolidation. Sometimes we work so hard to do everything we can to make sure our credit is good and when we accomplish that the credit card companies are like vultures trying to extend credit to us. Unfortunately what happens to us is we start to feel good that we have a great credit rating and we start to use the credit cards.

Before we get into debt consolidation I have to remind you that it is extremely important what you use your credit for because if you purchase assets instead of depreciable items even though you have debt you have a product that has value and hopefully is increasing in value. If you own assets you can always sell them and pay off the loan. On the other hand if you are buying clothes and other depreciable items you will pay for them for many years sometimes even after the item has no value. Once you have achieved your debt consolidation goal if you start over again you will end up in the very same place with additional debt. This is just another reminder of the importance of financial planning to your financial future. If you have a good financial plan you will not spend your hard earned money on depreciating assets.

Well let’s just assume since you are reading this you need debt consolidate. There are a few things that you need to focus on when considering consolidation. I suggest that you write down each bill with the total debt, the minimum payment and the interest charged each month. Now I would like for you to write down your total debt, total minimum payment and total interest each month. Next I would like for you to determine how much you can afford to pay each month on a consistent basis. Once you know how much you can afford we now know what our debt consolidation goal is.

Now that we know what our goal is let’s start looking at some ways to help us meet that goal. First I would check to see if I had any assets that I could sell to reduce the total debt. The next step would be to see if you can reduce the interest so you should see if you can find a loan with a lower interest rate and consolidate as many of the credit cards as your limit on that loan will allow. You then need to make sure that you pick the debt with the highest interest to pay off first. For the purpose of this lesson we are going to assume this meets our goal.

Now that we have a plan to reduce your debt we need to talk about making sure you don’t get in this situation ever again. First thing you need to do is get rid of all credit cards except one. I believe you should keep one credit card incase of emergency but an emergency means you truly don’t have any other options and it’s a life or death expense such as a medical expense and you should pay this money back ASAP.

Make sure you cut up the credit cards and send them back to the credit card companies with a note asking them to close the account at your request because you don’t want your credit report to say the account was closed by the provider.

Now let’s talk about how you will use credit in the future. I strongly appose using credit to purchase depreciable items. Now that you have been through the process of debt consolidation you will be getting your credit back again so I want to make sure you use it wisely. I want you to only use credit to purchase appreciable assets so always have something of value that will continue to go up in value even after you are done paying for it.

Leave Debt Consolidation & Go To Passive Income
Here you will learn some things you can do to increase your passive income. These are the types of investments that you can use credit to purchase. You just have to make sure the return on the investment will allow you to pay back the loan and still have income left over.

I have to warn you there are a lot of people out there that will promise to help you consolidate your debt but I must warn you to be careful because many of those companies are being paid by the credit card companies to help them collect the debt so they may be able to get your payments lower but you could be paying a lot more in interest over the long term. Then there are just some plain old scam artists out there that will take your money and never pay your creditors and by the time you figure out what’s going on they are long gone and now you are further behind on your bills. I have seen some people who got involved with some of these people and purchased a home only to find out they had been making payments to somebody that was never paying the mortgage and they ultimately had to move out and loose their down payment and the money they had been paying each month. The point here is if you feel the need to get involved with someone to help you consolidate your debt use caution.