How to Consolidate Debt
Now, let’s explore some tips for how to consolidate debt and achieve financial success.
How to Consolidate Debt: 6 Steps for Success
Is it overwhelming to think of all the debts you owe? Or are you hoping to secure a lower interest rate on these debts to make it easier to pay them off? Then you are in the right place. When it comes to paying down your debts, there are a few different methods to choose from. But in this post, we will cover our top tips for how to consolidate debt and set yourself up for financial success.
What is debt consolidation?
First, let’s discuss the basics of debt consolidation. A debt consolidation loan is a new loan obtained from a bank or financial company to pay all your existing smaller debts under one consolidated loan. By combining your multiple debts or “consolidating” them, you now have only one monthly payment that fits within your budget.
Debt consolidation loans tend to have lower interest rates than most other debts. These loans make it a smart financial option when interest rates hold you back from making any progress on your debts.
But keep in mind, a debt consolidation loan does not exactly combine all your debts, as each of your various debts has a different interest rate, payment frequency, and set repayment terms.
However, what you are doing with this type of loan is combining all your debts, taking that amount out in one large loan, and using the loaned money to pay off each debt. Doing this centralizes your debt into one manageable monthly payment.
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- Make a list
Start by writing a comprehensive list of the debts you owe, as well as their interest rates. When you look at this list, set some repayment goals as you go.
- Look into low-interest rate balance transfer programs
If you owe credit card debt, it’s worth looking into whether your credit card company offers low-interest-rate balance transfer programs. If you go this route, be sure to note exactly how many months the lower interest rate applies.
- Focus on your credit score
Work on improving your credit score as much as possible before and during debt consolidation. When you have a better credit score, your interest rates may go down, making repayment a bit easier.
- Consider your home loan
Home loans often have much lower interest rates than other debts. Consider using your home equity to pay off your debts. Just be sure you can make your mortgage payments.
- Rein in spending
When it comes to the most straightforward tip for how to consolidate debt, it’s this: while you’re focusing on paying down debt, control your spending as much as possible!
The more money you don’t spend on non-essentials, the more you will have to contribute to your debts. It can be challenging to limit your spending, but it will help you reach your financial goals faster.
Do you think you might be overspending? Take a look at this post for six signs you are spending more than you should: 6 SIGNS YOU’RE OVERSPENDING…WHAT YOU CAN DO ABOUT IT!
- Professional debt consolidation services
If you owe money to many creditors, we encourage you to seek debt consolidation services in Edmonton. For most people, a single loan from one source with one interest rate and one payment date can be less stressful to handle.
Debt consolidation isn’t suitable for everyone, but it is an option worth considering. The Fox-Miles team will work closely with you to help you make the best choice for your debt solution, including bankruptcy and consumer proposals.
Contact us today for family-friendly, non-judgmental insolvency, bankruptcy, and credit counselling services to help you through difficult times.
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