If you’ve begun the debt consolidation process, you may be asking yourself what steps to take after consolidating debts. Making on-time payments after consolidating your debt is one of the most critical things you can do.
If your property is being used as collateral, this is especially crucial if you take out a home equity loan to consolidate debt.
Automatic Payments And On-Time Payments
Even if you didn’t put down collateral to consolidate debt, timely repayment is critical — after all, if you’re late on payments and your lender or creditor reports it to credit bureaus, your credit score could suffer.
What is the solution? Set up automatic payments with your bank to ensure that you always pay your bills on time. Almost every bank’s website has this feature; all you have to do is click a few buttons. Freedom Debt Relief can assist you with the process as well.
If your budget permits, you should make an effort to make a payment that is greater than the minimum required by the loan. As a result, you’ll pay off the loan sooner and pay less interest over time. Documentation is required for every loan (even no-interest credit cards). Make sure you understand the loan terms by reading them thoroughly.
You should be able to respond to the following questions, for instance:
- When are payments due?
- On what day of the month do they have to be made?
- What is the smallest monthly payment you can make?
- Is there a penalty if I pay off the loan sooner than the terms require?
- What is the payment grace time before a late fee is assessed?
- What costs will you be charged if you skip a payment or make a late payment on your loan?
- When does a no-interest credit card’s interest-free period expire?
- At what point are you considered to be in default?
Be Sure You Understand All Of The Loan Terms
You should be able to answer all of these questions correctly. If you don’t, call the loan officer who assisted you in obtaining the loan and request a detailed explanation. Alternatively, call the toll-free number provided by most lenders and ask to speak with someone who can answer your questions. There will be no surprises or unexpected fees if you have a thorough understanding of the terms of your loan.
Examine your budget carefully and pay as much each month as you can afford. If it is within your means, the ideal alternative would be to pay the same amount monthly that you were paying on your high-interest credit cards. Although you may have a lower mandatory payment, pay the amount you were paying prior to consolidation to pay the debt off faster.
Don’t Fall Back Into Old Habits
Consolidating your debt just addresses a portion of the issue. Following debt consolidation, you may need to reconsider the actions that led to your debt. High credit card amounts, for example, do not appear overnight. They can develop over time as a result of years of spending beyond your means — or as a result of a financial emergency such as a loss of income.
If you need help with the steps to take after consolidating debts, they are available to assist you. For instance, examining your bank accounts can reveal information about your spending habits. If you don’t already have one, create one with a simple spreadsheet that shows your recurring costs (such rent, electricity, and loan payments) as well as any monthly expenses that are more variable, such as the cost of groceries or entertainment. Then you can figure out where you can save money.