After you have consolidated your debt, you might be thinking, now what? It is a good question and one you want to spend some time thinking about. There are some do’s after debt consolidation that you should be aware of.
The Do’s of Debt Consolidation
Some people end up with a lot of debt for reasons that are out of control such as a medical emergency, but for most people who have consolidated their debts, it is due to overspending on credit cards and other lines of credit.
That means it is in your control to improve your finances now that you have consolidated your debt. You can do so with the following do’s.
1.) Do change how you spend money – Everyone enjoys going out for a nice dinner or buying the latest tech gadget, but those things add up. Instead of buying on impulse, make a budget and stick to it. It might not be much fun, but it will help you pay off your debt consolidation loan and save money all at the same time. Decide if you really need something or simply want it. Spend money on the needs first and put off the wants.
2.) Do stop using your credit cards – There is no point in obtaining a debt consolidation loan if you are going to turn around and continue to use your credit cards. The worst position you can find yourself in is spending until you have high balances back on your credit cards and have a debt consolidation loan to pay off as well. This will not only make it difficult to meet your monthly financial obligations, it will cause serious damage to your credit score.
3.) Do make your payments on time – You will want to make your loan payments on time. That pretty much goes without saying, but you also want to pay as much as you can each month. That means if you have an extra twenty-five or fifty dollars a month, or more, you should use it to pay off your debt consolidation loan as quickly as possible.
4.) Do keep making your payments on your credit cards – If any of your credit cards have a payment due before the balances are transferred, you are still responsible for that payment. If you don’t make the payment, it will hurt your credit score. Keep in mind, it can take up to a few weeks for the balances to be transferred.
5.) Do use your credit cards wisely – It is best to not use your credit cards at all, but sometimes life throws you a curve. If you have a true emergency and you need to use your credit card, go ahead, but you want to be sure that you can pay it off in full in three months or less.
6.) Do keep your credit accounts open – It might be tempting to close your credit card accounts and cut up your cards once you get a debt consolidation loan, but that’s a bad idea. One factor that determines your credit score is how much credit you have available compared to how much you are using. If you close your accounts, your available credit will greatly decrease and your outstanding debt, as a percentage, will greatly increase. The best thing to do is to keep them open and not use them at all.
A debt consolidation loan can be a wonderful way to pay off all of your bills, but just keep in mind it isn’t a get out of jail free card. Once you obtain the loan, you need to follow some do’s to keep your credit on the right track and move on from debt consolidation.
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