How Consolidate Your Debt
Ever wondered if it is possible to consolidate your debt? A reader by the name of Ricky has written on a blog, Credit.com that since his divorce, he has been trying to get back on track by consolidating his bills.
Norma, another reader, also wrote on the blog claiming that the interest on her credit card was ridiculously high. She wanted to consolidate her debt into one payment and applied for a loan to do this. She added that she did not get the loan because of a bad credit report. This is in spite of her automatic payments always being on time. Her Chase and Sears interest rates had risen, one to 16.24% and the other to 29.99%. She wanted to know how this could be possible – how could such high interest rates be charged on credit cards – it was hardly worth having one.
How to consolidate your debt
Before applying to consolidate your debt, consider these tips and advice –
- Check Credit Scores and Credit Reports
Each of the major credit reporting companies will give you a free credit report annually – the first step on the way to consolidate your debt. Review your credit reports well so that you are not turned down the way Norma was. There are possibly even errors or negative notes on your credit report which you are not even aware of. Check your credit score where you will find information on how to improve your credit score and consolidate your debt. You will find out whether your credit rating is very good, average or not good.
- Debt inventory
Make an inventory of all debt owing on loans or credit cards you want to consolidate y our debt plus your monthly payments and interest rates, and consider consolidating the high interest rate ones first.
- Find a Reputable Financial Provider
Your bank might give you a loan to consolidate all your debt. You may also be able to transfer a balance from a credit card with a high rate to a credit card with a low rate. Ensure you deal with reputable companies and not ones who will use your information fraudulently. Find a financial provider who will provide you with information on their requirements. You get some financial providers who require minimal credit scores and others who won’t give credit to anyone who has been bankruptcy-listed.
- Applying for a Debt Consolidation Loan
As soon as you have found out what your lender’s requirements are, it time to apply for your consolidation loan. If you are turned down, it would be wise to find out why. There may be something small standing in your way, and once this is sorted out, you may well be reconsidered. Sometimes it can be helpful discussing your concerns with a credit counselling agency. They assist clients by helping to lower interest rates or payments via a debt management agency. You make one payment to the agency and they will then distribute your money to your creditors.
Make Your Monthly Payments as High as Possible to Consolidate Your Debt
Once you have been approved for debt consolidation, remember to look at the loan amount wisely. A consolidation loan isn’t a remedy for your debt problem, and to benefit from the loan, you will need to proceed with caution. The idea is to pay off your debt quickly. An attractive feature of consolidation loans is the potential for lower monthly payments. Just remember though that if the reduced payment is simply spread over a longer period of time, you’re going to be paying more. Set your monthly payment as high as possible because this way you’ll end up paying less in the long run.
Remember, dig yourself out of debt, not into it! Consolidate your debt now.
* YouTube video about consolidating debt