How to Consolidate Your Debt
According to the TransUnion statistics, the average credit card debt per borrowers has been rising to $5,472 in just the first quarter of 2018. With this, America’s debt has already reached trillions of dollars as of early 2018.
An average American has different loans like credit cards, student loans, mortgages, car loans, and personal loans. With all the loans that one can have, there’s always a possibility to miss a payment. Missing a payment can be because of hardships or simply the struggle of managing debts.
This is why some people turn to debt consolidation. Consolidating your debts simply means getting a sizable loan to pay off all of your other debts. It’s basically paying all your loans with another loan, but it should do you good.
If you think consolidating your debt is the next best option you have to fix your problems with paying your loan, then read on. Here, we will discuss how you can consolidate your debts if you don’t know how.
- Assess your loan situation
Before you find a bank, credit union, debt consolidators, or any other financial institution, it’s best that you take the time to sit down and go through all the details of your debts. List down your remaining balance, the interest rates you’re paying, your due dates, the monthly payment amount, longevity of loan, and other information that could help you decide on whether you really need to consolidate your loan or not.
When you do this, you’ll have to compute for the total interest you’re paying and how much you will be paying if you wait for your terms to end. You may be shocked by how much interest you’ll be paying, so if you consolidate your debt, you need to figure out whether this will really help you pay lower rates or not.
- Learn your options to consolidate your debts
While an offer from any financial institutions or consolidators to help you with consolidating your debt seems already appealing, it’s still best for you to have a few options before you settle. Of course, the interest you’ll pay for debt consolidation will still depend on your credit, but do know that not all of them, will offer you the same interest.
It’s best to have at least three options available and check the terms and agreement before you sign up for it. Don’t just easily settle with the offer that has the lowest interest rate. Remember that you also need to check how long the term will be and how they calculate for the interest rate or finance charges.
- Make sure that you qualify to get another loan
Making sure that your credit score is good could easily score you another loan. Typically, the score of 700 and above means that you’re a good payer. With this, you could be allowed to get a loan with a fair interest rate. If you’re lucky, you can even get a loan with zero interest.
Always check the qualifications that a financial company has to allow you to get a loan. These companies are usually checking for the types of loans you have, your monthly salary, and your assets. Secured loans could also mean that your assets may be on the line if you fail to send in any payments.
What’s important is that you take care of your credit score to avoid hardships in getting another loan. You can check your credit score by contacting the three credit bureaus in the United States.
Also, while looking for your options to consolidate your debts and ask credit unions or banks about this, make sure you ask about the pull of their credit inquiry. There are credit inquiries out there that could harm your score so be vigilant about it too.
- Debt management and financial goals
If you’ve already found the right people to help you consolidate your debt, then that’s already a good start to let yourself be debt-free. Speaking of which, you need to set this as your goal. Of course, this is only if it’s what you truly want.
Establishing a financial goal can help you go through the process of paying your debts. It may take you more than 5 years to do so, but with proper debt management, it’s possible to finish your loan off under five years.
Part of managing your debt is to continuously pay what you owe. However, it’s highly recommended that you don’t just send the minimum payment each month. While it’s fine to do this from time to time, sending more than the minimum can allow you to finish your loan off in less than five years.
Image Credits: Consolidate Your Debt from Monster Ztudio /Shutterstock