It can be a challenge to pay off your debt in time, especially during this pandemic when financial indecision prevails along with the economic recession. Therefore, you need to take the maximum steps possible to consolidate your debts.
The negative economic consequences of the pandemic will be there for many years. However, during this difficult time of unemployment and uncertainty, being debt-free is nearly impossible. Consequently, we have curated the top 10 recession-proof debt consolidation tips for you.
Top 10 Tips for Recession-Proof Debt Consolidation
These easy tips will help you recession-proof your finances. Here are the ten debt consolidation tips which can assist you with financial uncertainty during this health and economic crisis.
1. Pausing Credit Card Usage
Pausing all low-interest loans will help you tackle high-interest debts. Credit cards will not let you climb out of debt. They will continuously charge you interest for outstanding payments.
These interests can cause more expenditure and prevent you from having any monthly savings. Moreover, this will eat away the principal balance from your loans. This way, repaying high-interest debts from your hard-earned can be a challenge.
To prevent this, you may pause payments on lower-interest loans from your credit card. Subsequently, devoting those funds to eliminate your balance faster. Further, this will save you from unnecessary interest charges.
2. Lowering Interest Rates
You can ask your debt creditors to lower the interest rates on your loans. Yes, you can contact your borrower and request this. Therefore, this is a quick and easy way to reduce your burden.
Lowering your interest rate will be permanent or temporary, depending on your creditor’s policy. However, you can avail of this only if you make on-time payments or have an increased credit score.
Your creditors are liable to issue reductions at your request but with a considerable amount of discretion. Initially, if you are not successful enough to consolidate your debt, you can easily request again after a few months of timely payment.
You can find a lower interest rate with the help of refinancing your loan. It is a helpful debt consolidation tip that assists you in paying off your consumer debts. Further, you can use this tip to recompensate your student loans and mortgage with simple refinancing.
This method will replace your existing loan with better terms and lower interest rates. However, refinancing will depend on your credit score and the reduction of consumer loan rates. You are eligible for a lower interest rate only if your existing one has a good credit score.
The mortgage and student loans have comparatively low refinancing rates that will help lower your existing interest rates. However, this depends on the type of load and creditor you are associated with.
4. Modifying Loans
Instead of refinancing, you may modify your existing loan. You will benefit from it by getting immediate relief from financial hardships. This tip can help you modify your loan within a short time.
With this debt consolidation tip, you can manage your payments and reduce your interest rates. Moreover, a loan modification can lower your monthly loan expenditure. Further, extending your loan terms and reducing long-term payments.
You can contact your creditor to ask for opportunities in loan modification. Consequently, move forward with it only when you completely understand the structure and terms of the modified loan.
5. Tracking Budget
Any budget tracking service will help you with debt consolidation. It is an easy but overlooked tip. You can lose track of your money when you are paying with credit cards.
This digital form of payment detaches you from your cash and leads to the formation of debts. There are both free or paid tools for budgeting. These services will help you and your finances reconnect.
Budget tracking will help keep an account of your expenses while giving you a bigger picture of managing your finances. You can use such platforms to recession-proof your debt consolidations and meet your financial goals and needs.
6. Credit Checking
Sometimes your payments may forget to pay off debt. It happens when you have taken endless opportunities to borrow money to buy your favorite things. Therefore, it is crucial to check your credit report frequently.
It will help remind you of any outstanding loan or debt. Credit checking will help you realize any debt that you have forgotten about. It may include a small medical bill charged digitally.
Not having the physical proof can add to this issue. Therefore, we advise using this tip for better debt consolidation. Moreover, you are entitled to receive free copies of all your reports.
Credit checking can assist you in keeping a watchful eye on your credit report. Further, this will resolve all your financial issues that may arise from a surprise debt that you were not aware of.
7. Improving Credit Score
The better your credit score is, the lower interest rates you will be offered. Work on getting your score higher before consolidating large debts. Here are some ways in which you can improve your credit score for better recession-proof debt consolidation:
- Pay off small debts on credit cards
- Keep your loan balance lower
- Try not to apply for new credit accounts in a matter of months
- Solve errors in your credit report
- Dispute outdated information
- Keep revolving accounts active
All of these tips will help maintain your credit history that will determine your credit score.
8. Balance Transfer Credit Cards
With a low or 0% interest rate in balance transfer credit cards, you can reduce your interest balance. It will help transfer your existing balance of a higher interest into a card that can save you money. Moreover, this will help in paying off your debt quicker.
There may be a balance transfer fee for a low-interest rate. Nonetheless, balance transfer credit cards will help with debt consolidation. The new card will have transfer limits during the introductory period before a substantial interest rate starts.
Before moving forward with this tip, you need to strategize your repayment schemes. Further, making sure that the transfer does not cost you more.
9. Getting the Best Loan Consolidation Quotes
Grabbing the best quotes from borrowers works while consolidating your debts. You can refinance all your high-interest debts into multiple low-interest balances. Moreover, this will save you interest fees and help you prevent late or missed repayments.
You can compare offers and make you are getting the best interest rate. Therefore, you can go “loan hunting” to get your debt consolidation recession-proofed. It may be a complicated decision; however, an important one.
10. Canceling Small Credit Cards
If you apply for a debt management program, you need to close certain credit cards. It will give your creditor confidence and improve your chance of getting the best interest deal. Moreover, choosing another tip will also require you to cancel smaller cards. It will reduce your expenditure and consolidate your debt even better.
These recession-proof debt consolidation tips can help you save on interest. It will also assist you in streamlining all your payoff approaches. However, this is just one way of balancing your finances. Even so, these recession-proof debt consolidation tips will help you get out of that circle of debt. Follow these tips and make sure of having a better financial standing.