Before you begin consolidating your debt, find out exactly how much debt you’re in. List all the debt you have accrued, including credit card debt, student loans, and any other debt you’ve encountered in your life. Have this list ready to reference during the consolidation process.
Step 2: Pay down some of your debt
Once you know how much debt you have, it’s time to figure out which forms of debt you can pay down immediately. For instance, if you have a low balance on a credit card that can be eliminated immediately, pay it off before you consolidate. It will lower your monthly payments once you do consolidate.
Step 3: Determine how much you can afford to pay each month
If you’re having trouble making payments on your bills now, consolidation will only be effective if you can lower your monthly payments towards your debt. Once you’ve gone through the first two steps listed here, write down the total amount of money you’re currently putting towards debt every month. Then, come up with a realistic figure that you can afford to pay every month.
Understanding Your Credit
Video: Types of credit available to you
Before you consolidate your debt, learn the differences between personal and business credit in this video. This will help you to make an informed decision about consolidating the specific type of credit you have.
Step 4: Obtain a copy of your credit report
If you’re having trouble tallying up your debt, your credit report is one way to see the different types of debt you may want to consolidate. It will also show you how good (or bad) your credit is. Currently, the U.S. government has laws in place that entitle every American to a free copy of their credit report annually. Apply to receive a copy of your credit report and file it away with the list of debt you have calculated.
Step 5: Consider consulting a financial advisor
At this point, you should have a pretty good idea of how much money you owe to your creditors. Now, you have to decide whether you will contact a debt consolidator directly or work with a financial advisor who can help you through the process. Many people choose to contact an advisor because it enables them to get financial advice both now and in the future.
Step 6: Start researching different ways to consolidate your debt
If you choose to work with a financial advisor, ask them for help in choosing a trusted debt consolidation firm. But be sure to do your homework as well. Think about the types of services you need (credit card debt consolidation, for instance, differs from student loan consolidation) and choose a firm wisely.
Step 7: Choose a consolidation plan that makes sense for you
After you have made the decision to consolidate your debt, start asking questions about the way your debt will be consolidated. Decide how long you want to allot yourself to pay down your debt and find a payment plan that fits into your monthly budget. Remember that once you decide to consolidate, you are putting yourself at risk if you default on your repayment. So choose interest rates that are fixed and a payment plan tailored to suit your needs.
How debt consolidation helps save you money
Debt consolidation combines all your debt into one low monthly payment. See how it does it in this video.
Step 8: Fill out the proper debt consolidation forms
In order to actually consolidate your debt, you’ll be asked to fill out specific forms about the type of debt you have, the balance on your debts, your interest rates and other personal information. If you’ve gone through the previous steps, you will have no problem filling out these forms thoroughly. Either mail or email your debt consolidation forms and keep copies for your records. Staying organized helps ease you through the process and keep you on the right path.
Step 9: Consider closing any credit accounts you are not using
While closing lines of credit can be harmful to your credit report, especially if you’ve had a specific type of credit for a long period of time, it can also help you in the consolidation process. Most consolidation firms will not allow you to take on new forms of credit and also frown upon using old types of credit. In order to eliminate any temptation to use credit, close any accounts that you can. Your financial advisor will be able to tell you exactly how this will impact your credit score.
Step 10: Create a budget for yourself immediately
Now that you’ve started the consolidation process, learn how to budget your money wisely every month. Sit down and make a list of your monthly income versus your expenses and be sure to keep your debt in mind. As you go through consolidation, it’s always effective if you can pay more of your debt down every month in order to make a bigger and more immediate impact.
Video: Creating a Workable Budget
Step 11: Cut out any unnecessary expenses in your life
As you’re creating your budget, find ways to eliminate different expenses from your monthly spending. Downgrading your cable service or opting to use your cell phone for long-distance calls over your home phone may seem like small ways to help you with your debt consolidation, but every extra dollar that you can use to pay off your debt helps.
Step 12: Begin paying off your debt consolidation loan
After you settle on the terms of your debt consolidation loan and get the rest of your life in order, make a commitment to pay down your debt immediately. Keep up with your payments and make sure you make your payments on time every month. Consolidation companies have the right to penalize you for missing just one payment so keep yourself organized and send out your monthly payment on time every month.
Step 13: Sign up for electronic payments
If you’ve struggled with late payments in the past, opt for automatic electronic payments with your consolidation company. Every month, they will take your payment directly from your checking account on your due date. It’s the only way to make sure you positively do not miss a payment.
Step 14: Keep up with other debt you have
As you keep up with your debt consolidation payments, do not neglect any other debt you have and always stay timely with your other monthly expenses. Do not let other aspects of your life suffer or go into debt in other areas as a result of your debt consolidation.
Step 15: Refuse to take on new debt
If you are committed to paying down your debt, make it a point to stick to this mission as this time. Do not apply for any other credit cards or take on other life-altering expenses, such as a mortgage, until you have completed the consolidation process. Keep one credit card for emergency purposes only.
Step 16: Maintain a relationship with a financial advisor or your consolidation company
Continue to keep in contact with your financial advisor or credit counselor as you pay down your debt. They are there to provide invaluable advice during good and bad times and can offer up tips on improving your credit score as your debt dwindles.
Step 17: Open a savings account
Start saving money immediately. Debt consolidation offers you the opportunity to better understand your debt as well as your monthly spending. Use this opportunity to fund a savings account as you consolidate.
Step 18: Obtain a copy of your credit report once a year
Every year, apply for your free credit report and see how consolidation has helped your credit score. It may not make much of an impact initially, but it will keep you motivated as you make consolidation payments.
Step 19: Avoid bankruptcy
Regardless of how bad things get, you need to stay away from bankruptcy < http://www.uscourts.gov/bankruptcycourts.html > at all times. It’s one reason debt consolidation is particularly effective as it allows you a final chance to get your debt under control without doing serious damage to your credit score.
Step 20: Enjoy the benefits of debt consolidation
Once you’ve followed these steps and gotten your debt consolidated, you’ll begin to see the advantages of consolidation. The calls from the collections agencies will cease and your financial future will open up again. But you’re also not finished yet. Continue working at it until you’ve paid off your debt completely.
Learn about consolidation debt now
If you’re still confused about consolidating debt or just want to find out more information about the consolidation process, call one of these numbers directly to learn more about how you can start eliminating debt now.
Before you begin consolidating your debt, find out exactly how much 