Taking a debt is sometimes unavoidable. Loans or debts are meant to help us get through a financial crisis but if they are not repaid within a given time period, the crisis situations become graver and sometimes gets out of hands too. To avoid getting in to this endless cycle of financial crisis leading to debt and debt leading to financial crisis again, it is advised that you plan your personal finances well.
Saving some money every month from the money you earn is a good habit and is the very first step to secured financial future. Save on your grocery shopping or on the bills or on your petrol expenditure, just make sure you save at least a little every single month. There are two advantages of saving money in this way. Firstly, you can overcome a financial crunch with your previous savings and would not need to get a loan. And secondly, even if you do need a loan, you would at least be able to repay it in time with the money you have saved till then. You can see for yourself the utility of saving every month and hence if you have not started yet; it is advised that you do so immediately.
There can another scenario where even after saving for all your life you need to take up a loan and even after giving up all your savings you are unable to repay it. What is the solution for a situation like this? Well, there are a number of options that you can try before you accept bankruptcy and ruin your credit rating report. The first thing you should do is be very honest with your lender. Let them know about your situation and discuss the possible ways of getting out of it. The lenders too want their money back and hence if they feel there are any chances of getting it back they would definitely help you in any way they can. If you think you would be able to repay the loan if given some time then ask for it directly. If you have taken up more than one loan and you think that you would not be able to repay your loans even if you are given extra time over and above your stipulated time, then you can go for debt consolidation.
Debt consolidation is the process by which all your debts are consolidated as one and hence you need to pay the amount of only one loan. The advantage of debt consolidation is that the amount you need to pay each month would decrease considerably but the disadvantage is that the interest rate would be more and in the long run, you would end up paying much more than what you were supposed to initially for separate loans.