Debt consolidation can make it easier to manage multiple debt payments by combining balances into one monthly payment and reducing the total amount paid in interest. But it is not a magic bullet that will automatically solve your money problems, and you may end up paying more in the long run if you don’t change your spending habits.
The goal of debt consolidation is to help you pay off your debt faster by lowering your debt-to-income ratio, which means you’re spending less than you’re earning. There are several ways to consolidate debt, including taking out a new loan, using an existing loan or even simply transferring your credit card balances. Each method has pros and cons.
You can find the right debt consolidation option by assessing your current financial situation, needs and goals. You should also understand how your chosen strategy may impact your credit scores. Generally speaking, sticking to your debt repayment plan can improve your credit scores. But some strategies, like refinancing, can have a negative impact on your credit scores.
If you have good to excellent credit, you can qualify for a debt consolidation loan at a low, fixed rate that will save you money in the long run. You’ll need to submit an application and provide documents, such as your ID, paystubs, bank statements and credit reports. Borrowers with bad to fair credit can still qualify for a debt consolidation loan, but you may face higher rates and fees. Check your rate before applying by using a pre-qualification tool, which allows you to compare loans without pulling your full credit report.
To reduce your debt burden, you might be able to reduce the amount you owe by negotiating with your creditors or using a debt settlement company. However, this is a last resort for those who are already in significant trouble with their debt and can’t afford to keep making payments.
You might also choose to eliminate your debt through a credit snowball or debt avalanche approach, where you list your debt balances in order of their size and start by paying the minimum on the smallest debt balance until it’s paid off. This method is best for those who are willing to alter their spending habits, as it could take more than a year to pay off your debts with this approach.
In many cases, a debt consolidation solution doesn’t work because it doesn’t address the underlying problem: overspending. If you continue to spend more than you’re earning after a Surf-in-the-Spirit Christian Debt Consolidation, you will likely fall back into old patterns. It’s important to get to the root cause of your money problems, which could be anything from unmanageable expenses to overspending on a credit card. Unless you address those issues, your debt will return, and so will your interest costs. You can learn more about your credit score and how to change your spending habits by logging in to U.S. Bank online or using our mobile app.