Studies show that 70% of Americans are stressed over money.**
Debt remains an issue for most Americans, regardless of income. Those earning between $50,000 and $100,000 report having:
- Credit card debt: 52%
- Auto loan: 42%
- Mortgage: 39%
- Medical debt: 23%
- Personal loans: 22%
- Student loans: 22%
Anyone who has multiple loans and credit cards knows just how difficult it is to manage all the different rates and terms. It can also be expensive. Taking on a debt consolidation loan can help you turn an unmanageable stack of bills into one simple monthly payment. And if you qualify for a loan with a low enough interest rate, you can even save money. But the benefits of a debt consolidation loan can quickly turn into financial pitfalls and land you back in the red if you aren’t careful.
Here are 4 tips to manage your new debt consolidation loan and make sure your debt doesn’t return!
4 Debt Consolidation Tips
- Before you apply for a debt consolidation loan, add up the balances that you want to consolidate so you know exactly how much you need. Run some loan payment calculations to make sure you can handle the payment (minus the debts you are paying off) so that you don’t get over-extended again.
A good lender will work with you to structure your loan so that you get the right rate, term, and monthly payment that works for you. Look for a loan that does not have a penalty for paying your loan off early.
- Simplify the process by working with a lender who will pay your creditors directly, so you don’t have to worry about getting the “cash” and making the payments. Plus, it removes the temptation to spend the money on something else vs. paying off your debts.
- Set up automatic payments for your new loan, so you don’t miss a payment, incur late fees, or negatively impact your credit score. The payment can be set up to automatically come out of a designated account, so you don’t have to do a thing! You may even get a small rate discount for automatic payments.
- The last tip – but hardest – is to stop adding to your debt, while you are paying off your debt consolidation loan. Closing credit cards can actually hurt your credit score since it lowers your total available credit so having an open card with no balance is tempting. Do not use the card unless you can pay the balance off IN FULL each month!
A debt consolidation loan can be an effective way to save money, reduce stress, and pay down multiple debts. Just make sure you are disciplined about managing your credit and making your payments on time.