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How to Take Charge and Consolidate Your Debt

How to Take Charge and Consolidate Your Debt

In theory, debt consolidation is supposed to ameliorate your financial woes, not compound them. However, when you have to pay for debt consolidation services, the latter happens more often than it should. People who are already buried in expenses end up paying for costly consolidation services that they could just as easily have done on their own. Most of the time, you are better off saving your money and consolidating your debt with your own efforts. And remember that even the best consolidation service cannot make lasting changes to your financial situation unless you make fundamental changes to your fiscal habits. In this post, we’ll give you five steps to get you started on consolidating.

Consolidation in Five Easy Steps

Though it may seem like a daunting task, consolidating your own debt is not that difficult. Here are five things you can do to start consolidating:

  1. The first thing you will need to do is evaluate your current financial situation. Be honest with yourself about exactly how much you really owe. Sit down with your credit card statements and other loans to determine how much you owe and what your interest rates are on each account. You can obtain much of this information from your credit report, which you can order online for free.
  2. The next step is to assess your income. Look at your paystubs to figure out how much you make per month. You’ll also want to find out where your money is going each month. Add up your various expenses and subtract them from your income. Make sure you include things like rent, utilities, transportation costs, insurance, etc.
  3. Now make a plan of action to begin paying off what you owe. A good way to begin is to tackle the debts with the highest interest rates first and then work your way down. Identify the debt with the highest rate and devote the bulk of your financial resources to paying it down. While doing so, make only the minimum payments on your other, lower-interest accounts. Once that account is paid off, make your way to the debt with the second-highest interest rate, and so forth.
  4. After you have a payment plan worked out, contact your lenders. Most consumers are surprised at their creditor’s willingness to reduce their interest rates with a little negotiation. Usually, as long as your account isn’t delinquent, your creditor will work with you to develop a mutually acceptable arrangement. If you run into a creditor who won’t accommodate your request, threaten a balance transfer to another card or account to try to persuade them to see your side.
  5. Finally, start paying your debts and stick to your plan. Remember that consolidation is hard work, but if you are determined and diligent, the payoffs are significant. Stick to your plan and you will experience financial freedom before you know it.

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