Debts can pile quickly. When one credit card is maxed out, you might try to use another one. Add these to your existing loans and it may seem like an uphill battle to pay them. If you want to solve this problem, one solution is to consolidate your debts. This reduces the number of payments you have to make and can be a good first step to recover from debt. Here’s how to do it properly:
Identify The Debts to Consolidate
The first thing you have to do is to look at what debts you are currently paying. Pay attention to those that have high-interest rates. These are the debts that are causing you problems since the longer you leave them, the higher the amount you end up paying. Besides that, you will need to look at where these debts come from. They can be credit card debts, home loans, personal loans, and more. Credit card debts are a priority since they have high interest and they are easier to consolidate.
Transfer Your Balance
If you have multiple credit cards with debt on them, putting it all into one card is a great idea. If you have a high credit limit, a single card can absorb the debt so that you only have to pay off a single card. This means that instead of multiple interest rates adding to your debt every month. You have a single interest rate. There are several credit balance transfer programs out there.
As a rule of thumb, choose one that has the lowest interest rate. This allows you to catch up with your payments. Make sure that you are saving money on your payments though. Do some calculations to be sure of this.
Get a Big Loan
If you have non-credit card debts, then you will need to take out a loan to pay all of them. There are several options out there. There is the obvious debt consolidation loan that some banks and companies offer. The problem with these is that they often have high hidden fees. It is better to get another type of loan or refinance an existing one as long as it gives you a large amount of money and has a low interest.
For example, refinancing your mortgage from a Seattle bank or lender can be a good idea. Mortgages allow you to use your property as security which means you get a higher amount. Since you are already paying off the mortgage, extending it will not be that much of a problem.
Have a Strict Budget
Consolidating your debts is useless if you do not pay them off. Set a budget for your monthly payments so that you can pay off all your essentials and also your debt payments. Follow this strictly so that you can pay off your debt quickly. Don’t try to cheat since that will only cause problems for you.
Consolidating your debt is a big step to reduce the burden of payments on your shoulder. Paying off one large debt is much easier than dealing with multiple small debts. One payment every month can have you becoming debt-free in no time.