Personal debt can weigh on a person. It can take an emotional toll and affect someone’s relationships, job or their ability to buy a home or a car. Underlying the negative impact of debt is the tanking of your credit rating.
You don’t need good credit to fix your debt problem. While every situation is equipped with its own set of challenges, debt consolidation is a solution that can help many people. It can straighten out finances, reduce monthly costs and can help someone regain control over their life.
Here are some tips for consolidating debt:
Find the root of the problem
Are you living beyond your means? Are you paying off the debt with the lowest interest rate? Do you need to downgrade your home? Most people might be surprised to learn where their debt stems from and that there might be some obvious ways that one could tackle the problem.
It takes an honest approach to understand what is fueling your debt.
Research your different options
With debt consolidation, there’s no one size fits all. You need to understand all your options. Transferring debt or securing a loan are just two of the options. In certain cases, you could even opt for a debt settlement.
Whatever option you chose, the best course of action is to create a debt management plan. This plan can be crafted by a credit counselor or debt expert or it can be an agreement between you and your creditors that outlines the repayment plan in exchange for lower interest rates.
Avoid the usual traps
Without knowledge or a plan, you could thwart your efforts for a debt-free life instead of enabling it.
Two of the more common traps are not prioritizing the debt with the highest interest rate or consolidating debt with low-interest rates with ones with higher interest rates. You don’t want to pay a credit card interest rate for your student loan.
None of this matters if you aren’t working with a true debt professional. Choose the right partner who can help you draft a realistic plan that will get you out of debt with as little disruption to your life as possible.