Is financial freedom some imaginary tale, a modern myth? Is it a fake oasis in the middle of the debt desert that most people live in? Or is it something real and achievable? Even though each person’s situation is different, we do believe that reaching a state of debt relief is really possible. Below, we are going to discuss some of the most efficient ways that you can achieve that. But before we dive into the solution to the problem, let’s first try to explore why there is a major financial problem in so many people’s lives in the first place.
Why do people end up in debt cycles?
Carrying multiple debts is something that no one wishes to experience. However, with that being said, the reality is that many people go through such periods and for most of them, it is really hard to get out. There are many different reasons for a person to end up repaying a significant amount of debt and we are going to discuss some of them. It is important to acknowledge and understand that if many people are having trouble with repaying multiple debts, that cannot be by chance. The fact that the loan lending industry has had such a tremendous growth in the last 10-20 years is an obvious statement of the fact that there are many people who need the services that this industry has to offer in order to be able to keep their finances together. However, when that help from the loan lending industry becomes too much, or happens too often, things usually only go downwards until the person is ready to make a drastic change and start getting rid of all that debt. But first, let’s discuss some of the main reasons that make people take out loans and collect multiple debts along the way.
Every person’s situation is different
We live in a rather unstable economic environment where sustaining a stable financial state for a longer time period is becoming more and more difficult. It is safe to say that for many people nowadays, sustaining a stable financial state is impossible. Even people with better jobs and regular monthly income are going through the same troubling experience. The reality is that working hard is no longer enough to guarantee you financial security or freedom from debt. Of course, carefully planning your budget may give you a certain edge. It is a whole different thing to face unexpected expenses.
An emergency expense can be a number things. It can be a major health problem, or a car issue. Whatever the unexpected emergency expense is, emergency expenses are definitely one of the main reasons for many people to go into debt, as taking out a loan is often the only possible way for dealing with such unexpected expenses.
Getting into debt is not always because of outstanding monthly bills and emergency expenses. When people are younger, it is only natural that they want to turn their lives into something great, that they want to make the best that they can out of it, and so a lot of people strive for a successful career path. However, in order to have a successful career, in most cases, you need to first graduate from a college. Affording a college education is not something that everybody can do. In fact, many people cannot afford to pay for their college education. Usually, their only option is to take out a student loan. Even though student loans are generally considered as a self-investment as money that you give in order to develop yourself, the reality is a bit different. Most people with student loans continue to repay their student loan debt for most of their lives.
Another example of getting into debt with the idea of achieving something is to take out a home loan. To own a home is something that has always been a significant part of the American dream. The truth is that a person’s desire to have his own house is the most natural thing. However, not many can afford to buy a house. In fact, very few can do that without financial assistance from the loan lending industry. And so these people apply for a home loan, something that they usually repay for a very, very long time.
Let’s talk about the ways that a person can reach debt relief. After all, we only have a limited time and nobody wants to spend that time stressing over financial problems. That is why if you are dealing with multiple debt repayments, you need to put all your effort into the goal of reaching financial freedom.
How to reach financial freedom?
While there are different ways to deal with multiple debts, there is a method that definitely stands out which most people use to get rid of their debts and reach their goal of debt relief. That method is called debt consolidation.
What is debt consolidation?
Debt consolidation is a method designed to help people repay their multiple debts in a faster and easier manner. When you are consolidating your debts, you are basically combining them into a single monthly bill that goes to all your creditors. There are different ways for debt consolidation. There are 3 most popular methods that get the job done. These three debt consolidation types are:
- Debt consolidation loans
- Debt management programs
Keep in mind that debt consolidation is not some magical way of making all your financial problems disappear with the blink of an eye. Debt consolidation is a process that requires time and dedication for it to work, it has to be done in the proper way and you have to stay committed and true to your goal from start to finish, that is the only way to get rid of your debts once and for good, and have financial freedom.
Benefits of consolidating your debts
The benefits are real and quite easy to see. Here are those that matter the most:
- A single monthly payment instead of multiple bills
- A lower interest rate than the interest of all current multiple debts
- A lower monthly payment
Being able to focus on a single payment, compared to having to calculate multiple bills each month is a major plus. Dealing with many bills can be really exhausting. Even managing regular monthly bills is often a hard enough task. Add that to a number of loan repayments and the stress level is suddenly going up. So that is a benefit that simply cannot be ignored. Another major benefit is the possibility of a lower interest rate. Lower interest rate means less money for you to give. How can that be a bad thing? An overall reduced monthly payment can really give you some breathing room when you are planning your monthly budget. With a lower monthly payment, you may actually be able to afford stuff other than bills.
Debt consolidation loans
From the three main debt consolidation types, debt consolidation loans are probably the most popular and probably the most effective way for dealing with multiple debts.
What is a debt consolidation loan?
A debt consolidation loan is basically a brand new loan that you take out to repay your current multiple debts. A debt consolidation loan is a combination of all your debts thrown into a single, larger loan that also comes with new loan terms. If you have a good credit score, you will most likely be able to qualify for a debt consolidation loan with terms far better than the terms that you have on all your debts combined. Yes, these terms include a lower interest rate and also lower fees. In case you have a poor credit score, the chances are that you may still be able to qualify for a debt consolidation loan. However, even if you do get approved for such loan, it is highly unlikely that you would be able to get better terms than the ones that you already have. That does not necessarily mean that a bad credit debt consolidation loan cannot have a positive impact on your battle with multiple debts.