If you’re having a hard time staying on top of multiple debt payments, it might be time to consider debt consolidation.
For many people who are serious about becoming debt-free, consolidation is a good option. Consolidating credit cards and other debt allows you to combine and pay them all with one payment. What’s more, if you have a good credit score, you can often get a lower interest rate on the new debt, making it easier to pay it down faster.
The following steps can help you streamline your monthly payment obligations and ideally save you time and money on the road to becoming debt-free.
Start by getting a comprehensive idea of what you owe. Obtaining a free copy of your credit report will provide a comprehensive look at your debts. Then, make a list of all pertinent details for each of your credit accounts including:
Create the same big picture for your current financial situation. Figure out what you can afford by looking at things like:
In some cases, your debt may be too much for you to pay off and you may have to think about other options like debt reduction or debt relief. But beware that there can be high costs associated with these services, and if they’re not handled properly, they can also take a toll on your credit score.
Consolidation is best suited for people who have a good credit score already and can afford to pay off their debts. Consider consolidation before you get into a situation where you fall behind. And remember that the better your credit score when you start the process, the better interest rate you’ll secure.
There are typically four debt-consolidation options to consider.
Remember that debt consolidation is likely to have some impact on your credit score. For example, if you apply for a personal loan, some banks and lenders may do a credit check, which lowers your score by a few points. If you have a good score already, this will make less of an impact. But it’s still important to keep your credit healthy throughout the process by making all of your payments on time and as expected.
If you discover past errors on your credit report as you begin the consolidation process, you may consider working with a reputable credit repair service to get them corrected or removed. Doing so will have a positive impact on raising your credit score and can potentially improve your options for consolidation.
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