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How do I consolidate my debts and improve my financial situation?

If you're in debt burden and can't see a way out, try getting help so as to dig your way out of debt safely and comfortably. If you have a stable income source, you may consider consolidating your debts and rolling all your bills into a single monthly payment. Check out how you can consolidate your bills and lead a peaceful life.

Should I consolidate my debts?

Here’s a checklist:

  • Multiple bills are becoming unmanageable
  • Forgetting the due dates of payments
  • Creditors are calling you for payments
  • You're using one card to repay another

4 Ways to consolidate credit cards and other bills

If you’ve made up your mind to consolidate your debts but thinking “How do I consolidate my debts?”, then glance through the following 4 points to know your options.

Debt consolidation program

This can be your way to financial freedom when you need complete professional guidance to repay your debts. After you enroll in a program, you'll be able to merge your multiple bills (credit cards, utility bills, payday loans, store cards, etc.) into one monthly payment at a lower interest rate.

Bill consolidation loan

A consolidation loan can be your preferred option to enjoy a life free of debt. In this strategy, you take out a relatively low-interest personal loan from a financial institution to consolidate personal debt and pay back your creditors. Then, make one monthly payment to pay off your consolidation loan.

DIY debt consolidation

Instead of getting help from a consolidation company, if you’re trying to find out "How do I consolidate my debts myself?", then there’s an option. You can negotiate with your creditors for an alternative repayment plan at a comparatively lower rate of interest so that it’s easier for you to pay off your existing dues.

Balance transfer method

If credit card debt is what bothering you, then balance transfer can be your preferred get out of debt option. This is where you transfer your high interest debts to a low interest card with sufficient credit limit.
Thus, you consolidate and repay multiple credit card bills with one easy payment every month.

Benefits of consolidating debts to pay them off

Consolidating bills for a debt-free life offers you the following benefits irrespective of which option you choose:

  • Single payment every month
  • Interest rates on debts are reduced
  • Credit score may improve after paying back dues
  • Pay off debt with ease and enjoy a stress-free life

Can a calculator help you consolidate your debts?

You can take help of an online consolidate debt calculator to compute how long it’ll take if you make a fixed payment every month towards paying off your multiple bills.

How much to save through settlement

Amount you can pay monthly on your debts.


Consolidate debt companies - Tips to choose a reliable one

6 Parameters to choose a reliable consolidation company:


1
Review the report of Better Business Bureau
2
Check out whether or not clients are satisfied with the services
3
Go through the online reviews to know what the customers have to say
4
Know about how much you have to pay for the service
5
Look for the accreditations of the organization
6
It is better if the company is into business for at least 5 years

Can you consolidate debt with bad credit?

Honestly speaking, it’s a bit difficult to take out consolidate debt loans with bad credit. The creditors/lenders will evaluate the following 2 things to decide whether or not to grant your loan request.

Debt to available credit

Your outstanding debt amount is one of the main factors taken into account to compute your score. Moreover, the higher the credit utilization ratio (that is, the outstanding balance is near credit limit), more difficult it is to take out a loan.

Debt-to-income ratio

To grant your debt consolidation loan request, a creditor will also analyze your debt-to-income ratio - the comparison between your monthly payments on all debts to your monthly income. Sometimes, creditors take into account payment on new debt as well. This is because the creditors think what will happen if you consolidate and repay your existing debts, and then use cards and acquire more balance.

In such a situation, you can opt for professional help by going for a counseling session with a consolidation company. If you have a stable monthly income, you can qualify for a consolidation program and repay your existing dues.


Consolidate debt - Pros and cons

Pros
  • Lower interest rate
  • One consolidated and relatively lower monthly payment on your multiple credit accounts
  • May help improve your credit score
  • Cons
  • You may end up spending more if you overspend
  • May be difficult to obtain a personal loan for consolidation if credit score isn’t good
  • May not be able to consolidate student loans