If you want debt consolidation loan to be a successful debt solution, you need to create a payment plan. Unlike the other debt relief options, this will not involve a debt professional so you are on your own.
Since you have gotten yourself in debt, that signifies you are not the best person to handle your finances. Though a professional can help, some people forego the services to avoid the fees involved. But that does not mean you can rely on your own self control. You can set up tools that will help you stay on track towards debt freedom.
Debt consolidation is frowned upon by some financial experts because of certain pitfalls that puts consumers deeper in debt. This is another reason why a debt payment plan is all the more important.
A debt payment plan will provide you with the general scenario of your debts. It will tell you how much you should loan from a lender. Never get more than what you need to keep your debt amount in its current level.
Once your loan is approved, your payment plan will tell you the accounts it has to be distributed to. Some people get tempted to use the loan, or a part of it, on something other than debt payments as initially planned. Your debt payment plan should help you stick to the original course that you mapped out before you got the loan.
Another pitfall that could put you deeper in debt is your credit cards. Usually, debt consolidation loan is used for credit card debt. When the card balances had been paid off, they will all go back to zero. This means you can use them again without a problem. But that is the pitfall. Some people use their cards again and thus accumulate more debt. What you need to understand is that your debts were not paid off. You just shifted your credit to the loan so that you only have one creditor to deal with. If you start using your cards again, you will end up making things worse for yourself. Keep them or close them off. Do not worry about the credit score because as you make timely payments towards your loan, it will go up. If you want to maintain a credit card, choose the one with the lowest interest and use it only for emergencies.
Being alone in this effort means you need to rely on your payment plan to keep yourself from defaulting on your monthly contributions. Since you only have one payment, it should not be hard. Instead of juggling the usual number of credit accounts, you only have to watch one payment every month. Your concentration can now be focused on growing your income.
In the end, getting out of debt can be done through debt consolidation loans. However, staying out of debt is another problem. This is where partnering your payment plan with your budget comes in handy. Your budget will help define how much you are allowed to spend. It will help you develop the habit of living within your means, savings and making smarter spending choices. Make sure you work on these too.