Consolidating Debt Alternatives

Consolidating Credit: Plowing Through Debt

Debt piles up and becomes a burden. For some it is a matter of neglecting their finances or sloppy budgeting. For others it is unexpected expenses or loss of income that throws havoc on their financial plans. Running up credit can be a good "quick fix". Consolidating credit can be a good long-term solution. Choosing the right way to consolidate credit is important, otherwise it won’t get done.

Whatever it is, paying for medical, education, or auto expenses, or loss of income, we all know financial problems are stressful. Sometimes, just to plug the holes in the dam, credit cards and little loans seem like the ideal solution. That is until you have to pay off all your mounting expenses and the new credit bills.

Just coming to the realization that you have to deal with your problems is a great first step. Just like that big field in the picture, if you just leave it alone it will never be fertile and grow a crop to harvest. It takes hard work, and the right tools, to get the job done.

Consolidating credit is one general solution that contains different tools. To help you find the best consolidating credit option for you, follow the three steps, which each have a "thinking" and "doing" section;. Here are three steps to help you move across that field and turn your debt into greener pastures.

1. Gaze at the field — Know Your Problem.
2. Get the proper tools — Choose a Credit Consolidation Solution
3. Consolidating credit — Plow the Field

Gaze at the field — Know Your Problem

Thinking: Consolidating credit takes a fundamental knowledge of your financial situation. Realizing you are in debt is easy. Trouble making the payments on time, receiving collection calls, or not being able to pay for items you consider essential, are all easy signs to recognize. However, wanting to do something about it takes an exerted effort on your part. Therefore, it is easy to bury your head in the sand, and maybe the problem will go away by itself. Do not do that. Take a look around, and a deep breath of air. It is possible consolidate credit, save money and avoid the stress.

Doing: At the early stage concentrate on these three areas:

1. List of Debt: Different types of debt have different consolidation programs. Learn what type of debt you have (student, mortgage, auto, credit card, personal, etc.) and the terms of the loan, including sum, interest rate and fees, monthly payment, and repayment term.
2. Create a Budget: Create (and maintain) your monthly budget and learn exactly how much you can afford to pay. Bills.com offers you a comprehensive budget guide. Include in your budget a list of assets, so you can weigh the different alternatives.
3. Ways to Save: Your budget gives you the details of where you are spending money. It is imperative that you learn to cut costs (and that is not easy). Bills.com offers you a saving machine tool to give you an idea of different areas that you cut expenses.

Get the Proper Tools — Choose a Credit Consolidation Solution

Fixing your problems is easier once you get to know them. Consolidating Credit covers a large area, and the tools you have to work on will help determine which solution best fits your situation.

Thinking: Start by asking yourself the following questions:

• Do I have assets, home, car or investments that I can use as collateral for a secured loan?
• Do I have good credit?
• Can I increase my income?
• Can I barely make minimum payments?
• Am I behind in payments and feel stressed out?

The answers to those questions will help give you context to your situation and find a credit consolidation solution. As a rule, the better credit score and the higher your income and assets, the cheaper and easier the solution will be to find and implement. However, there are solutions for all situations.

Doing/Action Plans: Go along the list of questions and possible consolidating credit solutions.

Q: Do you have assets such as a home or car that can be used as collateral?

A: Look for a cash-out refinance or home equity mortgage loan. You will need sufficient equity in your home, good credit and a good DTI (debt to income ratio. If you have all three, then consolidating credit can save you on financial fees and interest. Check out Bills.com refinance calculator to see if refinancing is a good option for you.

Q: Do you have good income?

A: Try a balance transfer and optimize your credit card and loan payments. By transferring your balances from high interest cards to lower interest cards (be wary of great introductory offers) you will pay less each month and pay off your debt quicker. Use the Bills.com minimum payment calculator to learn why to avoid minimum payments. Make sure that you do not decrease your monthly payments. Instead add extra funds to your highest interest loans/cards or your lowest balance credit cards. You will finish your debt much quicker.

Q: Do you have an excellent credit score?

A: Shop around for an unsecured personal loan. Unsecured personal loans are short-term loans (up to 5 years maximum) carrying relatively high interest rates. The advantage of consolidating credit with a personal loan is that you set up a payment plan to get rid of your debt, at a lower interest rate. Remember, don’t run up new credit card debt . If your credit score is low, then read about ways to improve your credit score.

Q: Are you barely making minimum payments, falling behind, getting collection calls, or in default?

A: Check out a Credit Counseling or Debt Settlement Company. Both of these plans involve consolidating credit into one payment. A credit counseling program involves sitting with a counselor to determine if you can afford to pay off your credit card debt over a five-year period. If so, then you can enroll in a debt management program. You pay off 100% of your debt,. The debt management company negotiates lower interest rates and fees. You have to stop using your credit cards and make monthly payments through the debt management company, who takes a small upfront fee and a monthly service fee. A debt settlement company offers a more aggressive service to consolidate your debt. The company negotiates a settlement with your creditors for less than you owe. During the negotiation period, you make payments into a special designated account. Make sure it is in your name, under your control, in a FDIC insured account. It is important to go through an accredited debt settlement company, who only takes a fee on the completion of a successful negotiation.

Consolidating Credit — Plow the Field

Taking the first two steps is an excellent start. You know what to do, and you found the right tool to accomplish your goals. The next stage is implementing your program, and that can be difficult. The harder the problem you have, the harder you will have to work to get debt free.

Many people sign up for credit counseling or debt settlement and do not make it through the program. They set a budget, mean to make their minimum payments, and then just can’t do it. However, you have a great advantage. By taking the first two steps, you have prepared the groundwork for a successfully consolidating credit. Make the plan and stick to it and your pastures will be greener.