College has become increasingly expensive and more and more people have to borrow in order to finance their education. Once you complete your studies, you will be required to start repaying your loans. For most people, juggling all the loans they have can be quite frustrating. They may even feel overwhelmed. This is where debt consolidation will come in handy.
Debt consolidation involves lumping together all your debts into one big debt and then repaying this big debt. If you are considering this option, here is a simple step by step process to follow.
Step 1 – Get a clear picture of your debts
You need to work out how much money you owe and who you owe. A lot of graduates do not have a clear knowledge of how much money they actually owe.
Sit down and go through your finances and identify the lending institutions. You also need to know the interest rates charged on your loans. Consider how much you have managed to pay off and what the remaining balance is for each of your debts.
You also need to figure out how much money you are spending on repaying the debts.
Step 2 – Consider whether you need consolidation
You need to figure out whether debt consolidation is the best plan for you or not. In some cases, this might be the best solution, while in other cases, it might not be. Here are some questions that you can ask yourself to know whether this is the right option for you.
- Have you defaulted on any of your loans?
- Have you fallen behind on your monthly repayments and you are unable to catch up?
- Are you able to afford all the monthly repayments or are some too high for you?
- Would you like to simplify your loan repayment process?
If you answered yes to most of these questions, chances are that you need to consolidate your debts. It will make your financial life much easier to deal with.
Step 3 – Check out different consolidation plans
There are many financial institutions that are offering debt consolidation. Check them out and find the most suitable one that meets your needs. Some of the things you will need to consider when choosing a financial institution include:
- What are their interest rates?
- What are their late payment penalty charges?
- What is their track record?
It might take you some time to look through all the options that you have before you choose the best institution.
Step 4 – Work out a repayment plan
Once you have identified an institution to work with, you need to come up with a repayment plan. You will work on this together with the company.
When coming up with the repayment plan, you need to determine how much money you can afford to pay at the end of each month. You also need to agree on the interest rates and how long it will take for you to pay off the whole loan.