If you have a lot of debt from various creditors, you might be wondering if debt consolidation is the right thing to do. After all, wouldn't it be much simpler to pay one bill instead of several?
When you are ready to consolidate your debt, here are some things to keep in mind.
How to Consolidate Debt the Right Way
- First make a list of each loan you have. Write down the total amount, the monthly payment, and how much you are paying in interest.
- Get a free credit report. See if there are any errors that might be making your score lower than it should be.
- Avoid taking out any new lines of credit, as this will make your credit score really drop.
- Decide which loan consolidation is right for you. There are many options including unsecured personal loan, a home equity loan or line of credit, 401k loan, or balance transfer credit card. What you choose will depend on the amount of loans you have, your credit history, and the amount of discipline you have for paying off loans.
- Do the math. Figure out how long it will take you to pay off all the loans. Find out if there are any setup fees or fees for paying off the loan early.
- Interview several lenders and compare rates.
- Apply for a consolidation loan with confidence. Ask lots of questions before you sign the actual papers to make sure you know the terms.
- Stick with the plan. Consolidation loans only work if you pay them as promised. If you can afford to, pay more than the minimum. Once you have paid them off, try to avoid taking out any new, unnecessary debt.
Debt Consolidation Is One Way to Reduce Your Expenses
If you are looking to consolidate your loans to earn a better interest rate and pay them off early, contact our debt consolidation experts at Midland Mortgage to see how we can help you pay down your debts.