If you have a lot of high-interest debt with various due dates and payments, it can all be too much. You figure debt consolidation can help but you aren’t sure how the process works. And even once you learn, you don’t know where to find debt consolidation. Well, here’s everything you need to know.
What is Debt Consolidation?
It’s a financial strategy that involves rolling your unsecured debts into a single payment with a lower interest rate. Not only does the new rate make repayment more manageable, but debt consolidation streamlines the process. No longer do you have multiple bills to concern yourself with. You also can pay the new loan off faster than you would all those other bills.
How Does it Work?
You can apply for a debt consolidation loan, which is a type of personal loan, from a bank, credit union or online lender. Check here for local debt consolidation near me. Once approved, you’ll use the funds to pay off your debts from credit cards or medical bills, and the like. Some lenders will pay off your creditors directly. After those debts are cleared, then you only need to pay the new loan off. Unlike your other payments, this payment is fixed.
What About Credit Scores?
If there’s a rub, it’s that the better your credit scores, the better loan rate you’ll get. There are debt consolidation loans available for those with anemic credit, but you need to make sure the interest rate is lower than what you’re currently paying. Otherwise, consolidation won’t much help. So, shop around for the best rate you can get. Those with good or excellent credit – at least 690 on the FICO scale – get the best rates.
Credit unions usually are less stringent than banks, in terms of eligibility. For instance, in addition to your credit scores, your ability to repay counts too. But if you are a good customer of long-standing at your bank, you should try there as well.
Note that online lenders typically allow you to check your rate eligibility without a “hard” credit pull, which dings your credit. While the result is not an approval per se, it does give you an idea of what you’re eligible for.
Can I Do a Balance Transfer Instead?
If you do have good credit, then maybe you want to snag one of those 0%-interest balance transfer cards that credit card issuers occasionally offer for a promotional period. This is another form of consolidation, in which you shift your high-interest debt onto your new card.
You just need to be sure you can pay off your old debts before the regular interest rate kicks back in. Also, a big no-no is running up new debt on your new card, which will get you right back to the situation you’re now in. Credit limits are typically high – up to $50,000 or more in some cases — although the lender will have the last word.
Do I Really Need a Budget?
Why yes, you really do. For one thing, it was likely your out-of-control spending that got you in this financial mess. So, you do want to make sure you’re out of the deleterious habit of whipping out plastic at the drop of a hat. So, create a budget to not only track where your cash is going, but to make certain that you can make your new loan payments on a timely basis.
Now you know a bit more about where to find debt consolidation and how the process works. So, get going. Aren’t you sick and tired of being sick and tired?
Do something about it today.