Like most Americans, you have some debt. A lot of debt. Lingering debt can translate to exorbitant interest and cripple your finances well into middle age, even retirement!
Before it gets to that point, you should understand that you may be missing out on a tool that will help you repay that debt more efficiently.
Consolidating debt is not for deadbeats; it’s for average Americans like you who often take on consumer debt to make ends meet. But how do you go about consolidating debt?
Here is the top advice you help you find the best way to consolidate debt
The Consumer Debt Epidemic
If you’re mired in consumer debt, you’re not alone. Just check out these personal debt statistics:
- The average consumer debt, including mortgages, student loans, auto loans, and credit cards, is over $13.8 trillion.
- The average American credit card-carrying household has over $8,000 revolving credit card debt.
- On average, a credit card holder carries at least four credit cards.
- Almost 190 million Americans have credit cards.
Personal debt is not just a lack of impulse control (though there’s that to consider too!). If you want to own a house, drive a car, put yourself through college, you need debt. It’s almost a rite of passage in American society.
But, what happens when the economy tanks and the prosperity you were promised doesn’t pan out? That debt lingers and lingers.
Some consider bankruptcy. But before you go this route, you may want to consider debt consolidation.
The Benefits of Debt Consolidation
Debt consolidation may be your best way out. Debt consolidation means rolling multiple debts into a single credit card or personal loan at a lower interest rate.
One of the greatest benefits of debt consolidation is that you’ll save money on interest in the end. Also, with all of your debt in one lump place, you’ll pay it off sooner. You’ll have only one payment to worry about, so you’ll be less likely to make late payments.
Tips On The Best Way to Consolidate Debt
But what are the best ways to consolidate debt? As you’ll see, there are some strategic steps you can take when consolidating debt. If you take time to be mindful of what you’re doing, you can consolidate debt the right way.
Some of the top debt consolidation tips are:
1) Have a Plan
When it comes to ameliorating your financial situation, everything will flow more smoothly with a plan. Planning helps you maintain awareness of the end goal and makes the steps clear and actionable.
You’ll want to be clear on a few things, so make a checklist and include:
- How much debt you have in total
- The interest and minimum due dates
- A realistic timeline of when you’ll be debt-free
Taking a few minutes to map out the territory is one of the top debt consolidation tips you need to know.
2) Make a Budget
There may be some spending issues at the heart of your debt dilemma. Even if you’re not an out-of-control spender, budgeting is a good habit to keep throughout your life.
You can start by monitoring every dollar that goes out. Any personal finance guru will tell you this is the bare-bones, first thing you should do when healing your financial situation.
So track every dollar, even for just one month, then make a basic budget. Once you get keen awareness of your finances, your debt consolidation will actually pay off. If not, you may free up more debt to spend and be right back at square one before you know it.
3) Understand Personal Loan Types
You may need a personal loan. While a personal loan may come with interest rates as high as 30%, you can often get much higher limits. According to recent personal loan statistics, limits can reach as high as $100,000.
If you take on a secure loan, it means you’ve offered up some collateral, like your home, your car, or some other business asset. You may even get someone to cosign the loan for you. Secured loans usually yield better interest rates.
Unsecured loans are where you get the high double-digit rates. Without anything to secure the loan, the lender considers you a higher risk, so the interest tends to be higher.
4) Shop for Credit Cards
If your debt is all from credit cards, you may want to consider a credit card consolidation. Zero-interest credit cards can float you for a year interest-free, possibly saving you thousands. Be sure you have a plan for repaying it because, after a year, that interest will kick in.
5) Recruit Some Help
You may want to consider recruiting the help of a credit counseling organization. Like other types of counselors, a credit counselor will review the nitty-gritty of your financial situation.
A counselor of this type can also connect you with resources to rehab bad spending habits. They can provide assistance to help you get your finances organized and, in some instances, negotiate the settlement of debt with creditors on your behalf.
If your debt is mostly payday loans, think about seeking specialized assistance at Real PDL Help.
6) Ask Friends and Family
Asking loved ones for financial help can be a hard pill to swallow. However, it is an option, and it’s one you should consider if you have friends or family in a position to lend you money. It may be the best route to score a consolidation loan at zero interest, so it’s worth a try.
7) Consider Alternative Options
As a last resort, you may want to keep an open mind to some fringe options. Retirement account loans, auto finance loans, and home equity loans are also loan resources you can consider. But tread cautiously since you may be putting some of your most valuable assets at risk.
Learning how to consolidate debt is good, but you must take action once you’ve decided on the best way to consolidate debt. The sooner you start, the sooner you’ll find yourself debt-free!
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