There are few things that make us realise that we have to confront our own finances more than a looming financial crisis. The reality is that the slump coming off the back of the global pandemic is going to be a big one. There is no avoiding that. But there is some good news.
Unlike many other financial crises, this time at least we know it is coming. The 2008 crisis appeared quickly and caught a lot of people off guard. This time, with advance warning, we can take steps to help us minimize the impact.
If you have debt or borrowing you need to pay back, one key thing that you can do is restructure your loan to be more favorable for the coming downturn. But how do you know that restructuring your loan is right for you?
How to know when it’s time to restructure your loan
If you only ever pay off the minimum amount of your loan each month because that is all you can afford then you need to realise that it is going to take a long time to pay off the full amount – which is what the bank wants. A restructuring option will help you to pay back in a more efficient way, meaning you will be debt-free more quickly.
Another key indicator is that your credit report is bad. Being able to borrow is very important during times of financial crisis. If your credit report makes for unpleasant reading, then it could be time to change the way you borrow in order to tidy it up. This could be important if you need to borrow during the tougher times coming ahead.
If you are simply finding it difficult to keep track of all your debts then it may be time to bring them together under one umbrella. If bills and letters are constantly coming through your letter-box (or into your email folder) and it is getting hard to keep track, this is a sure sign that it is time to tidy things up a bit.
Basically, this means it is time for some debt consolidation.
What is debt consolidation?
What this means is the process of bringing all your loans and outstanding payments together into one repayment each month. This one monthly payment will then free up cash and reduce your level of overall commitment. This higher level of disposable income leaves you with more each month to take care of essentials and reduces your need to borrow more money. This way you can pay back everything you owe more quickly and with much less stress.
If this sounds appealing then you need to start looking for a suitable debt consolidation loan. When doing this, there are certain things that you need to keep in mind.
Tips for finding a consolidation loan
Low interest payments for consolidation loans may sound appealing but often they are only available for a limited period. It’s great at the beginning but once the rates go up you can find yourself in trouble again. So, look out for special offers but make sure you read the details and understand the repayment plan.
You also need to watch out for costs and fees, whether these are upfront or built into the repayment plan over time. Things like early repayment fees may not sound important now but if your situation changes and you can get the debt off your back, you don’t want to have to pay for that privilege.
Depending on your circumstances now, the industry you are in and the size of the coming recession (which remains to be seen) it may be tempting to take a lower repayment option now to free up some cash. However, be aware that this may extend your loan period which means you will pay more in the long run. This does have benefits for your credit score, of course.
Different banks and loan institutions have different requirements when it comes to consolidation loans. Some will only accept credit cards and personal loans, while others might take on house or car loans. You need to find a loan provider that covers all types of debt that you have. So, it’s worth looking around to see what’s available.
The most important tip
Hopefully some of the above has been useful if you find yourself in a difficult debt position and are worried about the coming financial crisis. There is still time to act and sort out your finances to put you in a better position for the coming months or years. However, there is one last tip that we think is the most important.
That is to ask for help. There are plenty of reputable loan companies out there who genuinely care about easing your debt situation. Yes, of course they will be making money from the interest you pay – it is business after all. But crucially you will be paying less than your current situation and it will be so much easier and less confusing to manage one debt than two, three, or ten.
Find a good consolidation loan product from the right provider and you can bring all your debts together in one payment. It will be a single, manageable monthly payment and you can choose a repayment plan that suits your needs in the coming tough times.
We all need to do what we can to protect ourselves in times of financial trouble. If you have debt, that means trying to reduce the burden you face each month and establishing a clear financial position that you can work with.
Debt consolidation can help you to break the habit of relying on your credit card to get you out of trouble. By making your finances clearer and easier to understand you are taking back control and gaining your financial freedom – and now is the right time to do it.
If you would like more information about debt consolidation then you can get in touch with our team. We will be more than happy to talk through your options.
