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Consolidate Debt

Make Your Money And Debt Work For You

Life is full of different journeys. There are journeys you take to new places and distant lands. There are also emotional journeys where you may struggle or where you may feel immense joy. No matter what journey we are on, we have the resilience to finish having learned something about ourselves. The same may be said about carrying debt and the journey we take to relieve ourselves from it.

Paying off debt is one of the more difficult financial journeys that many of us take. It’s easy to rack up credit card debt, and then struggle to pay it off or even make the monthly payments. Consolidating personal debt allows you to combine existing debt balances under a single interest rate that may be lower than the interest rates you are currently paying. This can help you to pay down your debt faster, and can help you to save on interest. While getting out of debt is a step in the right direction, it is also important to understand the reasons why you got into debt. Understanding these reasons will help you from accruing debt in the future.

Let’s start our debt consolidation journey by:

  1. Looking at the root causes of personal debt
  2. Learning where we need to change
  3. Finding out what to avoid when we’re ready to change
  4. Getting everything together to begin

As they say, “the first cut is the deepest,” so let’s start with the spending that saddles most of us with personal debt.

Breaking the Debt Cycle

Though debt consolidation loans go a long way to help with bills and paying off credit cards they only address the symptom, and seldom address the causes of debt.

Man Carrying Bike Up Mountain

For debt consolidation to be effective, you must stop accruing debt. Continuing to overspend even after you’ve paid off your credit cards is like finishing a workout with a pepperoni pizza. Journeys require fitness, and that means exercising discipline. Directly addressing debt may mean getting a personal loan for debt consolidation, but it also requires you to live within your means and reduce whatever expenses you can. You need a healthy financial plan for a healthy financial future.

Sometimes spending a little money here and there can add up – perhaps it’s a latte in the morning, new parts for the motorcycle you’ve been working on, or shopping to relieve the other stresses in our lives. Don’t rely on debt consolidation just to cover up the problem and keep spending – it’s time to nip that spending in the bud. Do whatever you can to get in front of your debt. Change the way you think about spending and your habits could change.

One of the best ways to positively affect your financial journey is to spend within your budget, and you should take whatever steps necessary to make that your reality.

Consolidation Choices: Lower Monthly Payment or Pay Faster

Just like all the twists and turns you encounter while on a journey, not every method of paying off debt provides the most efficient path. It’s easy to look at a monthly payment decrease and jump at the chance to have more cash in our wallet or bank account every week, but you still may be at financial risk1.

Couple Reviewing Finances After Paying Down Debt

One of the main benefits to consolidating debt is to pay less interest over the life of the loan and to pay debts down faster. Be cautious about extending your payment period because you may be paying more in interest for longer terms. Even if you lower your interest rate and your monthly payment, you may still pay more overall. Either way, you should do what financially makes sense. The goal is the same, no matter which route you take – to become debt free.

Let’s say you have debts that total $12,000 between a couple credit cards and a store credit account, and you’re paying around $475 each month at the average credit card rate of 14.99%2. You want to consolidate them into a single payment with a single rate. Using a debt consolidation loan from Discover Personal Loans, if you kept your same payment and received the lowest rate of 6.99%3, you’d still be able to pay off your debts 3 months faster and save $1,4904 in interest over the life of the loan.

You have options, though. It just depends on your objective. While you want to pay off all your debt, you may want to minimize your payments too. Discover Personal Loans offers flexible payment terms, so if $475 sounds like a little too much each month, you can opt to pay off the loan over a longer time period. This may cost more in interest in the long run, but it will ensure that you can comfortably afford your payments.

Other Consolidation Considerations

There are multiple options for consolidating personal debt and unfortunately, some of them have hidden risks. It’s best to discuss all of your options with a financial expert before diving in, because risks and rewards will be unique to your situation.

When you’re considering what to do with your debt, especially credit cards, here are some things to ask your financial partners:

  • What are the consolidation costs?

Many companies offer debt consolidation loans, but some will also charge fees. Discover Personal Loans             understands the sensitivities around paying down debt, which is why we’ve tried to make your journey as smooth as possible, with flexible payment terms, competitive rates and no closing costs or prepayment penalties.

  • Are minimum payments right for me?

Making minimum payments will keep your credit card account current, but it does little to pay down high interest debt. If you only pay the minimum every month on credit cards, especially if you have more than one, it may take longer. A personal loan for debt consolidation can help you get ahead by allowing you to pay off your credit card balances and combine varying payments into a single monthly payment.

  • Is a secured loan ever worth it?

If you default on these loans, it’s just like defaulting on your mortgage. Make sure you know the risks of putting up collateral before you accept a secured loan.

Get Ready for Change

Now that we know how we need to change and what to avoid – the guidelines to follow on your financial journey to get out of debt – it’s time to take your first step and find the personal loan that’s right for you.

To start the loan process, you need to know your total debt. Write down each credit card, loan and other debt with:

  • How much you owe
  • Annual Percentage Rate (APR) of interest
  • Monthly payment
  • Term of installment loans

After you’ve got your information together, contact a personal loan provider online or on the phone to find out how to get a personal loan. When you’ve found a debt consolidation loan that saves you money and is affordable, take it, and don’t let the temptation to spend be a hindrance to you on your journey.

When you change your thought process on spending, you can create a permanent shift in how you think about and use money, making it a tool to enjoy life’s journey instead of something that controls it.

1. http://blog.credit.com/2012/01/change-your-spending-habits-get-out-of-debt-51307/

2. Average credit card rate from creditcards.com

3. Discover Personal Loan APR ranges from 6.99%-29.99%

4. Calculated using the Discover Personal Loans debt consolidation calculator

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