3 Simple Steps to Debt Consolidation
Have you piled up a ton of debt and are paying enough money in interest alone each month to buy your own personal island? Debt can be a scary thing, and has a way of sneaking up on you. The first thing you need to know is there is light at the end of the tunnel if your goal is to get off debt.
If you have a mound of debt to pay, it might be time to consolidate with a debt loan. Here are a few helpful tips on how you can turn multiple high interest loans into one manageable low interest debt consolidation loan (DCL). The following tips are designed to help you through the debt consolidation process.
1. ASSESS YOUR DEBT
It’s time to bring out the pen and paper, because the first step towards debt consolidation is to assess your debts. This means that it is time to start asking yourself a few questions. One of the dangers of having high debt is that it’s easy to ignore how bad the problem might really be. This is the time to find out exactly how much debt you are in.
It is also a good time to find out how much you are paying each month towards debt. A great idea is to list all of your debts in order of highest interest rates to lowest. It is important to know the urgency of different debts so you can focus your efforts where they are most needed. For example, a small debt on a high interest credit card is often more damaging than a large student loan with a very low interest rate. You should also take a thorough look at your income. It is hard to restructure your finances if you don’t know what is coming in and what is going out!
2. WEIGH YOUR OPTIONS
Now that you know how much debt you’re in, how much you’re paying monthly and how soon you need to consolidate your debts, it’s time to look at your options. If you are a home owner, a home equity loan may be the perfect form of debt consolidation for you. If so, you can ask your lender if fees can be included in the debt loan amount. You can also get an appraisal and determine what is tax-deductible.
If you have excellent credit, a debt consolidation loan (DCL) may be an ideal option. The most common kind is a credit card balance transfer. This is where you take several debts of varying rates and move them all to one card. You’ll want to find a card that has the lowest interest possible, and make sure you plan to pay more than the minimum amount due. One thing you’ll want to avoid is being late on a payment, as it will send your interest rate sky-rocketing!
If you are not a homeowner and don’t have sparkling credit, it may benefit you to contact a debt consolidation counselor or pursue a debt settlement. These programs are not loans, and do not strictly consolidate your debt. These two options are typically reserved for the most severe cases of debt, but can be helpful in getting you debt free.
3. FIND A DEBT CONSOLIDATION COMPANY YOU TRUST
Not all debt consolidation companies are the same. It is good to remember that they are businesses trying to make money, and that some are not as honest as others. If you can’t hire an attorney to help you sort things out, do your best to research and read reviews on different companies. Find out how long they have been in business and what their fees are.
Also be wary of simply running to a “non-profit.” Just because a debt consolidation company claims to be non-profit doesn’t mean you are getting the most honest deal. Always check with the Better Business Bureau regardless of profit status. They offer consumers excellent resources when trying to find trustworthy businesses.
Our final bit of advice is to simply relax. Debt consolidation is a very common practice that will help your finances in the long run. You will lower your monthly fees, reduce high interest, waive fees, stop collection calls, and eventually become debt free. Remember that thousands of people just like you have successfully journeyed through similarly difficult times and made it through. Good luck!