Debt consolidation can assist in managing debt and improving your credit and financial situation. Staying on track with a debt consolidation plan involves using practical steps to remain within a reliable budget range.
How Debt Consolidation Works
With debt consolidation, one monthly payment covers several obligations. Those with a decent credit score may procure a secured or unsecured loan designed to combine all the debt into one loan. However, others could be in a challenging financial situation and be unable to procure new lending. Or they may be overextended and face bankruptcy.
A better option for some could be settling a debt for a percentage of the overall amount owed and rolling the remaining debt into a debt consolidation plan with a settlement service. Upon going this route, it would be highly advisable to stay on budget to avoid undermining the purpose of the debt consolidation plan.
Notes About Bankruptcy
When you file for bankruptcy, your credit history will reflect the filing for a set number of years based on your filing category. Chapter 7 is ten years, while Chapter 11 is seven years. Contributing any additional negative marks on your credit score could harm your financial recovery period. Some prefer to avoid filing for bankruptcy in the first place, and debt consolidation steps help the cause. Debt consolidation provides an alternative to heading into financial bankruptcy court, although bankruptcy could be unavoidable in many situations.
Staying within a Budget While Undergoing Debt Consolidation
Whether you are currently involved in a debt consolidation plan or trying to rebuild your credit afterward, you’ll need to devise an effective budget. Here are some insights to stay on budget:
Look at the Full Picture of Your Financial Situation
Before making any plans or changes, knowing exactly where you stand financially is necessary. That means you have to look at all your assets and obligations along with your income and sources of revenue. You devise a workable budget by looking at a clear picture and deciding where you need to save and where you have to save. Attempting to stick to an unrealistic budget could set you up for defeat.
Downsize Your Lifestyle
If you live outside your means, maintaining the same spending levels could lead to more debts. Moving to a smaller apartment could be a good idea if you live in a costly apartment. Cutting back on leisure expenses, such as eating out or paying extra monthly for streaming services, would be easy to eliminate.
Work a Side Job
In today’s gig economy, there are many ways you could earn additional money at your leisure. Various apps provide access to numerous 24/7 jobs and remote work opportunities. Adding only $50 a week yields $2,600 by year’s end, which could affect a stressed budget.
Be Flexible
Being flexible with your budget means you need to know when to make changes or alterations. Sticking with a plan that is not working can undermine success.
Creating a proper budget for debt consolidation plans may have challenges. Living up to the challenges could lead to a healthier fiscal situation.
Disclaimer: This content is for informational purposes only and is not intended as financial advice, nor does it replace professional financial advice, investment advice, or any other type of advice. You should seek the advice of a qualified financial advisor or other professional before making any financial decisions.
Published by: Martin De Juan
