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Debt consolidation is not a word you hear often when you read about health and happiness. Yet, how can one be
truly healthy without taking into account the stresses related to credit card debt and lack of proper debt management?
Too often, financial health is not recognized as a cause of physical health problems, but the stress of having
too much debt can certainly result in physical ailments. Headaches, high blood pressure, anxiety, depression, and
even heart ailments can result from poor financial health and the associated stress.
If you find that you have problems with debt management, perhaps debt consolidation to provide a means of obtaining
a "good health" rating on your financial debt check-up. There are financial "doctors" to advise
you about financial health, just as medical doctors advise you how to be physically healthy. You can also perform
most of your financial health check ups yourself unless you find yourself in a "critically ill" situation
with your debt.
How does checking one's own debt health work? It's simple, easy, and removes tons of stress. In many cases, it
also puts lots of money into your pocket rather than into that of the credit card companies or other high interest
lenders who hold some of your debt.
The first step is to take an inventory of your debts - all of it, not just credit cards. Make a list of each debt
you owe, who carries the debt, the total outstanding (pay off) balance, the minimum monthly payments, and the exact
type of debt (home, short-term, credit card, long-term, etc). List the interest rate charged for each of the debts.
You will probably find yourself with a list that includes home mortgage debt, debt owed to various credit card
companies, your car loan(s), and perhaps a few other items.
Next, highlight all those entries that carry a high interest rate. Credit cards usually carry and Annual Percentage
Rate (APR) of 14% to as high as 21.5% or even more. You may have signature loans or student loans that carry interest
rates higher than the current average lending rate. Learn the current rates by reading your newspaper or researching
online.
Add up the total outstanding balances and monthly payments of each highlighted item that carries a high interest
rate. You will see that credit cards are the highest interest items on your list. Whether you have balances on
major credit cards, department store credit cards, or gas company credit cards, the interest rate will be much
higher than those of your home or auto loans.
At this point, you should have a total of your high interest outstanding debt, and a total of your minimum monthly
payments for these debts. Using this information, it's time to turn to the Internet and perform a bit of research.
It is easy to locate many free-to-use online debt consolidation calculators. Choose a calculator and enter all
your high interest rate debts.
Here's one example: A couple owes $12,348 in credit card debt at an average annual percentage rate (APR) of 21.5%.
Their monthly minimum payments come to around $600 per month. It will take about 3 years to pay off their debt--if
they never charge another item during those 3 years! They will have paid over $4,000 in interest. More than 33%
of their balance will go toward accrued interest.
If this same couple can combine their debts into a debt consolidation loan at an interest rate of 7% APR, their
monthly payment will be a single payment of just over $400 per month. Their debt will be paid off in less than
3 years and only $1,300 or so will be paid toward interest. This means only a bit over 10% is actually paid as
interest on their balance. If the couple can maintain their payment level of $600 per month, their outlook is even
better. Only 22 months will be required to pay off their credit card balances in full and their debt will cost
less than $900 in interest! This is what debt management is all about. Manage your debts; do not allow them to
manage you!
It's easy to see how debt consolidation can help you pay off your debt more easily and with less financial stress.
In order to prevent finding yourself in the same situation again, you must perform monthly debt management. If
you find it hard to avoid impulse purchases with those credit cards, cut them up! Save one, of course, for emergencies
and reservations - things that you must have a credit card in order to be able to handle. Then, each month, pay
off the additional debt you've incurred in full. No more letting it pile up until it becomes a headache, or worse
yet, a heart attack.
If your debt situation is seemingly hopeless or too complex to understand on your own, visit a qualified financial
advisor. A Certified Public Accountant or a Financial Planner can help even the most complicated situations become
easy to understand and resolve to provide you with the financial heath you need to maintain your physical health.
Making a budget for your family's money and sticking to that budget is not difficult once you get out from under
the stress of dealing with piles of credit card bills and simply pay a single debt consolidation loan each month.
The money you save will allow you to rest easy at night and wake up refreshed and ready for the new day. Maintaining
management of your debt and consciously making good choices can help you avoid all those stresses which can result
in bad physical health!
If you have a high interest auto loan, include it into your debt consolidation. If you have almost paid your home
off in full, you can access the equity in what is possibly the largest savings account you will ever have--your
home--and finance your high interest rate debt payoff that way. Whichever way you choose, it is always best to
enjoy your money instead of paying it to credit cards or other high interest rate loans. The money you save can
provide you that dream vacation you've always wanted!
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