If you’re faced with a growing amount of debt or have multiple debts that you just can’t seem to be able to pay off, it might be time to create a new debt management plan.
One way you can regain control of your money is to consolidate your debt. There are various ways to consolidate debt, ranging from obtaining a low-interest credit card to getting a loan.
The Best Methods for Debt Consolidation
While not every debt consolidation option may be right for you, it’s important to be aware of all available options.
Knowing what you owe and to who you owe the money to helps you to develop a plan for paying down your debt.
A critical part of this plan is knowing your credit score and what’s on your credit report, making this the first step in paying off your debts.
To help make it easier, the following is a list of the top five ways to consolidate your debt and put yourself in a better financial position.
Review Your Credit Report
As mentioned above, your credit scores are an essential part of the process, so obtaining your credit report is step one in any debt consolidation or debt management strategy.
If you haven’t checked your credit report or credit scores recently, make sure you know what’s in your credit history before you start weighing your debt consolidation options.
By law, you’re able to obtain your three credit reports every twelve months from www.AnnualCreditReport.com. This is free of charge, and you’ll be able to get your credit scores from each of the three major credit bureaus (Experian®, Equifax®, and TransUnion®).
Create a Budget
This might sound simple, but many people struggling with their monthly bills don’t have a budget in place.
Before you research your debt consolidation options or apply for a credit card or loan, make a list of what you owe.
Identify your balances, what the interest rates are, and what your monthly payments on each debt are.
Also, take into account your income and any additional money you have coming in so you know what you can afford and where you can reduce your spending. This is a simple way to consolidate debt and get in control of your finances.
Apply For a Debt Consolidation Loan
There are a wide variety of alternative lenders who offer debt consolidation loans.
Knowing which lender is offering the best loan at the lowest interest rate in your area can be tricky, if not confusing.
By doing some research, you can learn which debt consolidation loan options are reputable and are willing to work with you if you have bad or poor credit.
You can also get assistance by using the resources available at the Federal Trade Commission’s (FTC) website or through AmONE’s free matching service to learn whether an unsecured debt consolidation loan is right for you.
Apply For a Low-Interest Credit Card
For some, consolidating their debt onto a credit card is an effective way of reducing the number of monthly payments they have to make.
However, it should be noted that this debt consolidation option works for people with good to excellent credit. The higher your credit score, the more likely it is that you’ll be able to successfully apply for a credit card with a low interest rate.
Also, not every credit card offers the ability to transfer balances from one card to the other, and not all debts can be paid off using a card, so this might not be the best way to consolidate your debt.
Apply For a Bank Loan
If you have good credit, getting a loan from your bank or credit union might be an available debt consolidation option.
Like a debt consolidation loan from an alternative lender, you can use the loan amount to pay off your other debts, leaving you with fewer or even one monthly payment.
If you have less-than-perfect credit, you may not be able to qualify for a loan from your bank, so make sure you know what the credit requirements are.
Looking for the best way to consolidate your debt requires a great deal of research.
Not only do you need to know the state of your finances, including your credit history, but you also need to know all the options available, as well as whether or not the debt consolidation option you choose is right for you.
Dos and Don'ts of Debt Consolidation
Debt Consolidation FAQs
Is debt consolidation a good way to get out of debt?
For many consumers, debt consolidation is a good way to get out of debt. The important thing to keep in mind is to only consolidate debt that is costing you more than it would be for you to consolidate it. Don’t include debts with 0% interest in a debt consolidation loan. In most cases, it will be better to continue to pay that debt separately.
Does debt consolidation hurt your credit?
As with any loan, when you first get a debt consolidation loan, your credit score might go down by a few points, but this is only temporary. In the long run, as long as you make your payments on time, debt consolidation can help your credit.
Should you close your credit cards after you consolidate your debt?
Eventually, you will want to phase out most of your credit cards, but in the short term, don’t close them all out at the same time, or your credit could take a hit. Obviously, if you’ll be tempted to charge more, you made need to consider what works best for you, but if you can hide them away or even cut them up and not use them, it’s better not to start shutting them all down.
If you have questions about whether or not debt consolidation is the best solution for your financial situation, AmONE is here to help. Our financial search specialists are available to answer your questions toll-free at 888-401-0330 or, if you prefer, you can complete our simple and easy-to-use online form to find the highly rated debt solutions available. Our service is always free and comes with no obligation.
