Posts Tagged ‘debt consolidation tips’

Debt Consolidation: Tips for Eliminating and Minimizing Debt

When it comes to debt consolidation, there are so many things to consider so we’ve put together a list of debt consolidation tips to help make navigating this road easier. Just a little bit of debt consolidation fairy dust for the masses.

Eliminate Credit Card Debt

The first step toward financial freedom is eliminating your credit card debt.  There are a few ways this can be done.  Obviously you can pay down the debt.  Let’s be honest though, that is usually not very easy, and if it were, you would not be here.  First and foremost, stop using your credit cards.  Put them away, and avoid charging anything for at least 3 months.  After that, you’ll be surprised how easy it is to ‘stay off plastic.’  Next, organized your credit cards by balance and interest rate.  Make minimum payments on all but one card (either the card with the highest interest rate, or the lowest balance, depending on what works best to motivate you).  I prefer to pay low balances off and eliminate a payment.  Pay as much as you can on this one, and when it is paid off, move to the next.  Follow the same methodology until all cards are paid off.  If you have a card with low balance transfer interest rates and enough credit, consider consolidating all cards onto that card.  Put those cards away for good, and pay as much as you can afford each month to the new single balance.  If these aren’t options, there are debt consolidation services available that will take this a step further and consolidate your accounts for you.  You then pay them a monthly payment to pay down the balances.

Reduce Student Loan Payments

Student loans are notorious for following graduates for decades.  This is because most students can’t afford to pay the loans off in the 5-10 year term given.  Student loans are consolidated more often than not, and this provides a lower monthly payment for graduates and professionals years out of school alike.  Consider a 20 year term if possible.  You’ll often see lower rates on average, and enjoy a substantial savings in monthly expenses.

Leverage Your Assets

One of the biggest debt consolidation tips I can give is to leverage what you have.  Not all debt is bad, and not all debt is created equal.  If you own a home and are in good standing with a good interest rate, consider a home equity line of credit or loan to consolidate certain debt.  You will have a much lower monthly payment, and often lower interest rate.  The drawback is you will typically be paying for this on a much longer term, but this allows you to save a lot of money on a monthly basis, and you instantly free up those balances which gives you points on your credit report.

Worst Case Scenarios aren’t Necessarily that Bad

If these tips don’t apply or don’t do enough, you still have other options.  You can consider a personal loan, either from your bank, credit union, or social lending institutions.  The interest rate may be a bit higher, and you may be limited to the amount you can borrow, but it still allows you to consolidate multiple debts into one balance and one payment and is often enough to make a big difference.  

That’s it for this portion of Debt Consolidation Fairy’s debt consolidation tips.  Look for more in the very near future!