The DCP Rule Book: Prolonging the Positive Effects of Debt Consolidation Plans
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Debt consolidation is the saving grace of people struggling to pay multiple loans with multiple deadlines. This loan solution combines all of your unsecured loans into a single payment with lower interest rates and a more fixed term. If used properly, it can eliminate your debt efficiently, as well as save you more money on interest payments.
Similar to other financial products, however, an effective debt consolidation loan plan requires discipline and commitment to pay off your dues. Here are some do’s and don’ts to keep in mind.
Before you apply for a debt consolidation plan (DCP), compare the interest rates of potential plans, and find the one with the lowest offers. Keep in mind: the longer the loan tenure, the more interest you have to pay during the loan’s lifetime.
Some financial institutions offer complimentary insurance, promotional rates, and other money-saving benefits. While you should not settle for a DCP because of the inviting welcome gifts, these money-saving features should make it easier for you to decide between potential plans.
Consistency is the key to the success of your DCP. If you do miss a payment, you’ll end up paying higher interest rates plus a late fee (as determined by your chosen financial institution). The situation is similar to when you are unable to pay your credit card — only this time, there won’t be other financial products to use in case you default on your debt consolidation plan.
Discipline yourself in paying your dues. Use a DCP calculator to know the number of your monthly payments then create a budget around this. Once you start your plan, make sure to pay your dues on time — no questions asked.
Once your debt consolidation plan is approved, you won’t be able to use existing personal loans, credit cards, and other unsecured credit facilities. DCP, however, comes with a revolving credit facility (a different type of credit card) with a fixed credit limit. This feature provides you with an easier mode of payment in case you run into an emergency or need help covering your daily expenses.
It may be tempting to use your credit facility, but you must refuse to do so. Using it defeats all your efforts in resolving your debt and can put you in a deeper financial hole. If you use the facility to pay and continue to spend on repaying your DCP, you might be unable to pay the bill in full. Similar to your credit card, this facility comes with high-interest rates and late fees.
If you feel that you have the tendency to use your credit facility, have someone take care of it for you to avoid temptation.
A debt consolidation plan simplifies your payment for multiple balances. However, it’s just one part of the solution. For you to stay debt-free, watch your spending habits and work on areas for improvement. Find ways to limit spending and consider finding side jobs to supplement your current income.
A debt consolidation plan is not the only answer to your financial struggles, but it will help you if you use it responsibly. Capital Fund Investments is willing to assist with your DCP. Get in touch with us today.