Debt Consolidation Attorney
Debt consolidation is a financial option that involves rolling multiple debts, usually high-interest debt like credit card bills, into one simple payment.
This debt payment option can be an excellent opportunity for you, especially if you qualify for a low enough interest rate. Lower interest rates help you decrease your overall debt and reorganize it, so that you are able to pay off the debt in a timely manner.
If you are working with a fairly manageable amount of debt and simply want to reorganize multiple bills with various interest rates, due dates, and payments, then debt consolidation is an excellent payment option that you can handle on your own.
Debt solutions related to debt consolidation with a debt consolidation attorney
Here are some of the top debt solutions related to debt consolidation with a debt consolidation attorney that we recommend:
How to consolidate your debt
We recommend consolidating all of your debt into one account, especially if your credit is fairly good but your debt payments simply feel overwhelming. When you consolidate everything into one account, you only need to make one payment each and every month to reduce your credit card debt balance. There are a couple of primary options for debt consolidation, and both of these options concentrate your debt payments into one simple monthly bill:
- 0 percent balance transfer credit card. While it might seem counterproductive to apply for a new credit card when your primary goal is to eliminate your credit card debt, a 0 percent balance transfer card can actually help you save money on paying down your credit card debt over the long run. We recommend looking for a credit card that provides a long 0 percent intro period, about 15 to 18 months if possible, and you can transfer all of your debt to that one credit card account. You will just have one easy payment each and every month, and you won’t need to pay any interest. You usually need good or excellent credit, about a 690 credit score or higher, in order to qualify for this option.
- Fixed-rate debt consolidation loan. You can also take out a fixed-rate debt consolidation loan to pay off your credit card debt. You will need to pay some interest, but the interest rates for personal loans are usually much lower than they are for credit cards, so you can save money in the long run. You can qualify for this type of loan even if you have bad or fair credit, a 689 credit score or lower, but borrowers with higher credit scores are more likely to qualify for the lowest interest rates.
There are also a couple of extra ways to consolidate your debt, including taking out either a 401(k) loan or a home equity loan. Keep in mind that these two debt consolidation options do involve some degree of risk to your retirement and your home. The best debt consolidation option for you typically depends on your credit profile, your credit score, and your debt-to-income ratio.
When debt consolidation is a smart move
The debt consolidation strategy with a debt consolidation attorney can work for you if you meet the following requirements:
- You have a plan to prevent from running up your debt again
- Your cash flow consistently covers the payments toward your debt
- Your credit is good enough to qualify for either a low-interest debt consolidation loan or a 0 percent credit card
- Your total debt, not including your mortgage, does not go above 40 percent of your gross income
As long as you meet all of these requirements, the debt consolidation method should work well for you. Here’s an example when consolidation might make sense for you. You have three credit cards with interest rates ranging from 19 to 25 percent, and you always make your payments in a timely manner, so your credit is fairly good. You can qualify for an unsecured debt consolidation loan at 7 percent, which is a much lower interest rate and will help you pay off your debt faster and pay less money overall.
Debt consolidation often offers a light at the end of the tunnel for most individuals with debt. For example, if you choose to take a debt consolidation loan with a three-year term, then you know that your debt will most likely be paid off within three years, as long as you manage your spending and make all of your payments on time. On the other hand, if you continue to make minimum payments on all of your cedit cards, then it could be several years before all of your cards are paid off, and you will most likely end up paying more money in interest.
When debt consolidation just isn’t worth it
Unfortunately, debt consolidation is not the best debt payment option for some people, partly because it doesn’t address the unmanageable spending habits that led to the mountain of debt in the first place. It’s also not a great option if you are overwhelmed by your debt and are unable to pay off the debt even with lower payments.
If your debt load is fairly small and you can likely pay off your debt within a few months to a year, then you will probably only save a small amount by consolidating your debt, so you should not bother going this route. We recommend paying off your debt with a DIY debt payment method like the debt snowball or the debt avalanche instead.
- Debt snowball. The debt snowball method is a great way to pay down your debt quickly, since you can use your sense of accomplishment from paying off your debts as motivation to keep going. With the debt snowball payment method, you prioritize your loans and debt by the amount and focus on your smallest loans first. Once you’ve paid off the smallest loan, you roll the payment you were making for the smallest loan into the amount you contribute to your next smallest loan and so on, much like a snowball rolling down a hill.
- Debt avalanche. The debt avalanche payment method is very similar to the debt snowball method, but it actually swaps your priorities. Rather than paying off your debt with the lowest balance first, you actually pay off the debt with the highest interest rate first. This ends up being the cheaper and faster method, since you are paying less interest and money overall to your creditors.
And if your total debt is over half your income, then you are probably better off seeking a debt relief option like bankruptcy than trying the debt consolidation method.
We recommend speaking to a debt consolidation attorney at the Van Horn Law Group to learn more about debt solutions related to debt consolidation.
Debt Consolidation is the Solution You’re Looking For
Debt consolidation can be tricky if you don’t know all your options. But the Van Horn Law Group has helped thousands of clients just like you with similar challenges. To get started, simply fill out the Free Case Evaluation form today – we’ll help you navigate your debt consolidation options.
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