The cost of debt is growing. In 2022, we’ve seen the biggest interest rate jump since 1994, and rates are expected to climb even higher in coming years. As a result, interest rates on your debt could rise, which means it costs more to pay it off. Meanwhile, inflation is dramatically driving up everyday living expenses, leaving you with less money to put toward high-interest debt repayment.
Now is the time to take charge of your financial future. If you’re struggling with debt or looking to pay it off before it spirals into an unmanageable problem, debt consolidation could be the best way to get back on track. These debt consolidation tips can help you explore your options and consolidate in a way that makes sense for you.
How Debt Consolidation Works
Debt consolidation involves taking out a loan or line of credit and using those funds to pay off some or all of your debt.
The benefits of debt consolidation include:
- Combining debt into a single monthly payment
- Reducing the amount of interest you pay
- Enabling you to pay off debt faster
However, not all debt consolidation strategies are the same. Understanding the pros and cons of various consolidation methods is essential to choosing the best solution—and determining whether consolidation makes sense for you in the first place.
Top Debt Consolidation Tips
If you’re considering consolidating your debts, these debt consolidation tips can help you start your journey to financial independence the right way:
Minimize Risk
Debt consolidation should be a way to alleviate the burden of debt, not add new financial hazards to your life. However, some of the most common ways to consolidate debt involve using your most important assets as collateral, which exposes you to significant risk. For example, if you consolidate using a home equity line of credit (HELOC) and fall behind on payments, you could lose your home. When creating a consolidation strategy, be sure you understand all the risks involved and choose options that minimize it whenever possible.
Negotiate Your Balances
Before paying off your debts with a consolidation loan, consider negotiating your balances. If you have credit card debt, for example, credit card companies may be willing to accept a single lower payment that guarantees that they get some money as opposed to no money. If successful, this proactive approach can drastically reduce your debt and help you achieve financial independence sooner than you thought possible.
Make a Realistic Plan
Making on-time payments is crucial for any debt consolidation to work. If you can’t manage your consolidation loan repayments, you’ll end up in the same situation you were trying to escape. To ensure your consolidation plan is viable, you need to take an honest look at your financial situation and determine how much you can realistically pay toward your debt each month.
Consider the Impact of Your Credit Score
Many people are hesitant to consolidate their debt due to the potential impact on their credit score. The fact is that debt consolidation can lower your credit score in the short term, especially if combined with debt negotiation. But don’t get discouraged. Paying off debt will ultimately have a positive impact on your credit score, and chances are that you’ll end up much better off than you are now.
Work With a Coach
You don’t have to navigate debt consolidation alone. Working with a debt resolution coach ensures you have the support of an experienced professional. They can assess your unique financial situation and help you decide on the best course of action. From negotiating with creditors to securing the right consolidation loan, a debt resolution coach is with you every step of the way.
By choosing the right approach for you, debt consolidation can be an invaluable tool to restore your financial well-being.
National Debt Relief is Here to Help
National Debt Relief combines industry-leading expertise with personalized support to help you get your life back. Our debt resolution coaches work with you to explore what’s possible and create a path to get there.
Since 2009, the National Debt Relief team has helped over 450,000 Americans resolve their debt and take charge of their financial futures. By working hand-in-hand with our coaches, you can implement the best debt consolidation tips in a way that makes sense for you and start living the life you want. And our support doesn’t end once you consolidate debt; we offer ongoing guidance and education to set you up for long-term success.
If you’re tired of living with debt, there is a light at the end of the tunnel. We’ll help you find it.