Debt Consolidation Checklist
This step-by-step debt consolidation checklist will help you get ready to consolidate your debt and navigate the debt consolidation process.
Step 1: Scope out Your Situation
Before you begin the debt consolidation process, ask yourself these questions to see if debt consolidation may be an option for you, and which debt consolidation might be right for you:
· How much do I owe in total debt?
· What kinds of debt do I have?
· How much can I afford to pay any costs?
· Why do I want to consolidate my debt?
· Do I have any home equity which I can borrow against?
· If I have any home equity, do I want to borrow against it?
· Do I expect to take on any more debt, and if so, how much?
Our Debt Consolidation Calculator can help you find out if debt consolidation may be an option for you and how much you may be able to save by consolidating your debt.
Step 2: Add It Up
Gather all the paperwork related to your debts, such as credit card statements, tax statements, medical bills, and others to find out:
· How much you pay each month for each debt account
· How much you pay in interest for each debt account
· How much you pay each month for all your debts
· How much you pay in interest for all your debts
Step 3: Know Your Score
Next, get a copy of your credit report and credit score. You're entitled to one free copy of your credit report and credit score every year. After you get your credit report, check it to make sure the information on it is correct.
Depending on your lender and the actual loan product, a credit score of 650 or higher may help you get lower interest rates, but don't worry if your credit score is lower than that. You can improve your credit score by paying down any debts you owe, making payments on time, not applying for any new loans or credit cards, and fixing any mistakes on your credit report.
Step 4: Shop Around
Now it's time to go shopping. Talk to several lenders and compare their debt consolidation options. Ask lenders these questions:
· How much can I borrow?
· What interest rate do I qualify for?
· What are the fees and other costs, and how much are they?
· What terms are available?
· How much will my monthly payment be?
· Is there a fee if I pay my loan off early?
· Is borrowing against my home equity an option?
· Are there any other special requirements?
Remember that just because a debt consolidation loan offers the lowest interest rate or monthly payment, doesn't mean that the loan costs the least.
Step 5: Choose an Offer and Close the Deal
After you've been approved for a debt consolidation loan and decided which option best meets your needs, choose an offer and close the deal. It's now time to verify information about the debt consolidation loan, take care of any final details, and sign the paperwork and make it official. Remember to get any promises or details about your debt consolidation loan in writing, read everything carefully before you sign it, and ask a legal or financial expert to help you understand anything that isn't clear.
Step 6: Plan for a Debt-Free Future
Consolidating your debt is only one part of a plan to get your debt under control and eventually pay it off. After consolidating your debt, it's important to be careful about taking on more debt, save for emergencies, and make a plan for spending and follow it.
Related Articles:
Debt Consolidation Decision Helper
How Debt Consolidation May Improve Your Credit
These are general recommendations not applicable to all financial situations. Every financial situation is unique. Further, the suggestions and recommendations contained within the content provided are not an assurance of any future result. Be sure to discuss your specific financial circumstances with a legal or financial expert before you take action. Contact us for more information.
