Ready to start consolidating debt? It may be easier than you think. By following some simple steps, you may be able to get out of debt sooner than you think. Read on for a more in-depth look at the steps you should take to start consolidating debt and get on the road to financial independence.
1. Budgeting
The importance of budgeting can’t be stressed enough. When you are in debt, it’s important to be very aware of where every penny is going, so you can dedicate the most you can to paying off debt. If your monthly expenditures are exceeding your monthly income, you need to look for ways to either increase your income or reduce your monthly expenditures. It is much easier for most people to reduce their monthly expenditures than to increase their income. If you want to reduce your spending, look into your biggest expenses and start cutting from there.
2. Evaluation
The next step is to identify the main cause of your debt and start taking corrective measures. Make a list of all your outstanding debts, interest rates and monthly payments. Look for any exacerbating factors to your debt and try to mitigate them. For instance, if you’re always late on your monthly payments, the late payment fees you’ve been charged may have led to a huge amount of debt. Similarly, if you have a high interest credit card, this might be the main reason why you have so much debt as even a small purchase can balloon into a huge cost. Identify the biggest contributing factors to your debt and start figuring out how you might deal with those costs.
3. Determine how much you can afford to pay monthly
Debt consolidation means combining all your debts so that you make just one monthly payment, not multiple payments to a variety of creditors. If you’re considering debt consolidation as a way to get out of debt, you will need to come up with a realistic plan of how much you can afford to pay back each month on a debt consolidation loan. If you cannot afford to make the monthly payments on a consolidated loan, another good consolidation option is debt settlement. With debt settlement, you’ll have a consolidated monthly payment and you could end up paying only a portion of what you owe. However, you will probably need a debt counselor to negotiate on your behalf.
4. Credit report
Before you start searching for a debt consolidation company or lender, get a copy of your credit report. Go through it carefully and isolate those debts that affect your credit score the most. These debts should be given first priority when you consolidate your debts.
Finding a Partner
The final step is searching for someone to work with you in your debt repayment journey. There are many companies out there that offer both loans and settlement. Be sure to do your research to determine which would be the best debt consolidation company to approach. To get a more in-depth guide to consolidating debt, check out our full-length video that will take you through the process one step at a time.
