Figuring out how to work with the debt you have is a common exercise for many people. By some estimates, 80% of Americans have some form of debt.
Whether you’re just beginning to pay off debt or working towards minimizing debt, it may help to answer some fundamental questions about your situation.
Those questions include:
- What are the root causes of debt?
- How can I prevent debt from happening and save more?
- How do I apply for a debt consolidation loan?
Let’s look at these one by one.
What are the Root Causes of Debt?
Other reasons listed in Bankrate’s top 10 include:
- Medical expenses
- Poor money management
- Lack of savings
- Not communicating with your family about money
- Counting on making more money in the future
- Financial literacy
Some of these issues are within our control and some are not.
It may help to identify the cause of your debt, which can be easier said than done. Financial coach Todd Tresidder suggests on Credit.com that debt builds up based on daily habits we may not realize we have.
How Can I Prevent My Debt From Growing and Save More?
There are countless ways to save money. However, their effectiveness could vary widely based on your particular lifestyle, family situation, geographic location, job, commute or any number of other factors.
Saving money can also be about more than just dollars and cents, as there’s often a psychological component to managing your finances.
Tied up in your ability to save is the issue of preventing debt. How do you do it?
There’s probably no perfect or easy answer. Part of the equation, though, is simplifying, organizing and consolidating the debt you currently have.
You could start by considering the following:
- Take higher interest bills and consolidate them in a personal loan that offers a lower rate
- Work with a personal loan lender that can pay off your creditors directly all at once
- Avoid paying origination or processing fees when consolidating
How Do I Apply for a Debt Consolidation Loan?
Once you’ve decided if consolidation is the right step for you, Discover Personal Loans actually makes it easy to apply for a debt consolidation loan online in just 3 steps.
Before you apply, you should have an idea of how much you want to borrow, the interest rates you’re currently paying , and what amount you would be comfortable paying on a monthly basis.
Discover’s debt consolidation payment calculators can help you estimate those numbers.
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, while a lower monthly payment may be enticing, you may end up paying more in interest for longer terms. A shorter term personal loan may have larger monthly payments, but you may pay off the loan more quickly and ultimately pay less in interest over the life of the loan.
Also consider what impact, if any, rising interest rates may have on the debt you take on.
The Value of Asking Questions
There are some who believe asking the right questions could change your life.
It’s a good way to get a grasp on a particular situation, so you can develop a plan, rather than just diving in and hoping for the best.
Debt is one of those things that can sneak up on you and grow more than you’d expected. Whether you’re trying to pay off debt fast, figure out if yours is good or bad debt, or just develop a long-term plan you can stick with, these 3 questions should help put you in the right frame of mind.