According to the American Household Credit Card Debt Study, the average American carries more than $15,600 in credit card debt. Add this to tens of thousands of dollars of student loan and auto loan debt, and it is clear why many Americans struggle with debt.
High debt payments often create a tight budget that is difficult or impossible to manage. When you consolidate your debt, you can put yourself on a path toward serious debt reduction. Debt consolidation offers benefits like reducing monthly debt payments and establishing a firm debt elimination process. However, this critical step does not guarantee financial freedom. Hard work and potentially years of effort are required to effectively overcome a substantial debt situation. Alongside debt consolidation, these essential steps are required to maximize your efforts of becoming debt free.
1. Adjust Spending Habits
A debt problem often signifies an issue with overspending or inadequate savings to cover unexpected expenses. Adjusting your spending habits is necessary to avoid being in this situation again, and it also may promote faster debt reduction results. While you can and should reduce superfluous spending, such as morning visits to the coffee shop and unnecessary clothes shopping trips, reducing regular expenses is essential. For example, lowering your housing expense and downgrading to a more affordable vehicle help reduce your regular monthly expenses. Other ideas to consider are to shop for lower insurance and smartphone service plans. Identify ways to save across all recurring expenses for the best results.
2. Close Accounts
After you consolidate your debt, most or all credit card and personal loan debt may be transferred to a single loan with a fixed term and a lower interest rate. Your high-interest credit card accounts will have a zero balance, which can be a dangerous temptation. Many people who have consolidated debts have made their problem worse by maxing out their credit cards again while still paying off the consolidation loan. Close all credit card accounts except one to avoid this problem. Request a lower credit limit on the account that remains open for additional benefit.
3. Contribute to a Savings Account
If you are like many other people dealing with high debt balances, you may have used credit cards to pay for unexpected or unplanned expenses several times in recent years. This could include paying for emergency medical services and home repairs, or it may be something more frivolous, such as buying a new TV. Your adjusted budget should allocate a regular contribution to a savings account so that the balance increases slowly over time. The funds can be used as an alternative to credit cards.
4. Seek Support
Several support options are available to help you cope with your stressful financial situation. Christian Debt Counselors offer practical support that provides practical, personalized insight about managing finances and reducing debt. Other anonymous groups are organized in many cities and may provide additional emotional support for the long road ahead. If you are currently addressing legal issues related to your debt problems, such as a potential foreclosure or vehicle repossession, consult with a personal lawyer.
5. Track Your Progress
Some people expect to see major results right away through debt consolidation. Consolidation simply transfers debts from one account to another. The new account is easier to pay off because of a fixed term and a lower interest rate. Therefore, you should expect to see faster debt reduction than you otherwise would, but the process can still seem frustratingly slow. Paying off debt is akin to running a marathon rather than a sprint. Assemble a spreadsheet showing your current debt balances. Each month, create a new column showing the lower current balance to track progress. By seeing the progress made, you will have confidence that you are on the right path.
6. Monitor Your Credit Report
Reducing personal debt and making payments on time should generate slowly rising credit scores. Periodically, review your credit report to ensure that your scores are actually improving. Fraud, identity theft, and other crimes are major concerns that can result in lower credit scores, significant financial loss, and potential legal issues. These outcomes could be a major hindrance on your road to financial freedom. Monitoring your credit report regularly is beneficial throughout the rest of your life, including after all debts have been eliminated.
Take the First Step
While consolidating debt is often viewed as a final, effective solution for eliminating debt, it actually only sets the stage for improved success through hard work and serious effort. It may reasonably take several years to pay off a debt consolidation loan. Numerous factors can impair your ability to achieve desired results in the years ahead. Each of these steps helps you to avoid or to minimize the impact of these various factors so that you can more easily achieve the financial freedom you seek. The first step, however, is to contact Christian Debt Counselors today to set up your debt consolidation loan.
At Christian Debt Counselors, a trained professional will work with you to review your debts to help find the right debt solution for you. It’s time to start living without the financial pressures and burdening debt – call today!