Lending Club Blog

How to Consolidate Your Debt by the End of 2011

The following is a guest post by Jason Holmes from Debt Consolidation Care who writes about debt related topics including debt settlement, debt consolidation, credit card debt, and loans.

If you have piled up some debt and want to get out of it by the end of 2011, then you can try out debt consolidation by either enrolling in a debt consolidation program or taking out a personal loan to consolidate your debts. Read on to know about these to options to consolidate and pay off your debts by the end of 2011.

Consolidate your debt through consolidation program

One option is to enroll in a consolidation program. There are various debt consolidation companies in the nation that offer effective and honest programs. But your job will be to find out a reputable debt consolidation company that has been in the industry for several years. You can get all the necessary information about the company from the BBB’s (Better Business Bureau) website. You should also get to know about the services of the company from its existing customers. Once, you have gathered all the relevant information about a particular debt consolidation company, contact the company representatives as soon as possible.

Before meeting the representatives/counselors at the company, it is always better to make a complete list of existing debts and calculate the total outstanding balance. You can get detail information about your debts and creditors from the credit reports. So, pull your credit reports as early as possible. It is also necessary to calculate your monthly income and expenses prior to approaching a debt consolidation company.

Since you want to consolidate your debt by the end of 2011, it is better to inform the representatives/counselors of this goal beforehand. The reason is, the counselors will then draw up such a payment plan that can help you pay off the debt in the next 12-14 months. However, make sure you get help from a company that charge minimum fees for their services. This will make it easier for you to pay off the debt. If you find that a particular company is charging an exorbitant fee, then don’t hesitate to move on. Chances are, they’re just in it to make a buck off of you.

The counselors at the company will analyze your financial situation (total debt, income, expenses) when you have enrolled in the consolidation program. They will then get in touch with your creditors and inform them that you have enrolled in the consolidation program. The counselors will negotiate with your creditors to waive off the late fees and reduce the interest rates of the loans. Once the creditors agree with the company to cut back the interest rates and you consent to the payment plan offered by the counselors, sign the necessary documents. After signing the documents, you’ll only have to make one monthly payment to the company. The company will forward the money to your creditors after deducting their fees.

Since you want to consolidate your debts within 2011, it is important to make some extra payments. It is not an easy task to consolidate debts within 12-14 months. You have to work hard for it. Making extra payments to the consolidation company may help you get out of debt within the stipulated period. Here are 2 tips that can help you make some extra payments:

  1. Stick to a strict budget: Make an effective budget on your own or with the help of online budget planner and stick to it. Track your monthly income and expenses. Curtail all the unnecessary expenses. Find interesting ways to reduce utility bills, water bills, etc.
  2. Earn more: Search for the ways to earn more money. Try out alternative investments, stock trading, blogging, writing articles for various websites, freelancing, part-time jobs. You can even ask your family members to try out new ways to earn a substantial amount every month. This will surely help you bring some extra cash in your home.  However, make sure you understand the risks before jumping into any new endeavor, and always have a cap for any potential losses.

Make sure you utilize all the extra cash towards the payment of debts. Otherwise, your aim of consolidating debt by the end of 2011 will only remain a dream.

Consolidate your debt through consolidation loan

Debt consolidation loan can also help you consolidate your debts by the end of 2011. All you need to do is find an economically stable financial institution (bank or credit union) that offers consolidation loan at low interest. Start by researching for interest rates at banks (on sites like BankRate.com) that are located in your area of residence offering personal or collateral-based loans that can be used for debt consolidation.

If your credit history is in good shape, peer-to-peer personal loans are becoming the norm for paying off debt, allowing the borrower to consolidate debt and pay it off at lower rates than typically found at a bank. Peer-to-peer personal loans are also easy to apply and fully online.  A peer-to-peer consolidation loan helps you pay off your debts to your creditors all at once and only deal with one monthly payment.

Usually, the interest rates of these consolidation loans are much lower than that of the credit cards. The debtors only need to make single or one monthly payment to the financial institution. There is no need to manage several or multiple bills anymore. Thereby, debtors can repay the loans easily and sleep peacefully.

However, there are some financial institutions that charge extremely high interest rates on the loans. This specially happens with the debtors with bad credit. So, if you have bad credit, take necessary steps to repair it. However, if they are charging high interest rates in spite of having good credit, then move on. It is also important to not get trapped into easy loan scams. There are financial institutions that offer consolidation loans at very low interest rates. But they stretch out the repayment plan period, which means you end up paying more in the long run.

Before taking out a consolidation loan, make sure you calculate the total cost of the consolidation loan. This should include loan amount, payment plan period, processing fees, late payment fees, documentation charges, pre-payment penalty and interest rates. You can calculate the total cost of the loan with the help of a debt consolidation calculator accurately.

Finally, if you want to repay the loan by the end of 2011, take necessary steps to increase your income so as to pay more than the minimum. Restrict your over spending habits. Never make the mistake of making late payments. If you do so, it will be difficult for you to repay the debt within the next 14 months

Image credits:
Debt Consolidation ad, Circa 1948,  courtesy of Orin Zebest.
Credit cards and cash, courtesy of Anthrocopy.

Saturday, November 13th, 2010 at 6:01 am

Comments (9)

  1. Anna K:

    I hope I can get this loan to pay off credit cards. They are not
    that high, but the peace that you get from paying them off and
    having one monthly payment is priceless.

    November 15th, 2010 at 6:26 am

  2. A good way to pay off your debt is to put any unexpected income
    towards your debt.

    November 15th, 2010 at 7:36 pm

  3. You have detailed enough ideas for consolidation of your debts, but
    you must warn your readers that there are some companies who are
    consolidating debts into deeper debt hole. Beware from them!

    November 15th, 2010 at 11:13 pm

  4. I’ve consolidated with a personal loan before and it worked out
    really well for me. I needed to pay of a big chunk of debt before I
    started my new business and I was glad that it worked out for me.
    If you can just buckle down and sacrifice for a while, anyone can
    make this work. Thanks

    November 17th, 2010 at 2:02 pm

  5. A very thorough article with some great ideas to help me get my
    debt under control. Now I just need the self discipline to follow
    through until its paid off. That you can’t get from reading a blog

    November 17th, 2010 at 11:56 pm

  6. I would say consolidation is an option as a long term solution but
    you need to check the small print before entering into any
    agreement. Also keep an eye on the market as there are a number of
    alternatives that if you do your research, can save you in the long

    November 19th, 2010 at 3:39 am

  7. Another good way to stay of of debt is to not spend money you don’t
    have. Hint hint uncle Sam.

    November 19th, 2010 at 5:10 pm

  8. I think people need to learn to stop living beyond their means. All
    debt relief programs are great, but unless you change your behavior
    you will find yourself in the a similar position again.

    November 21st, 2010 at 5:15 pm

  9. I agree with Jay and Lex. A debt consolidation loan or debt relief
    program may get you out of debt, but learning how to change your
    lifestyle or how to cut back on expenses accordingly will help you
    stay out of debt and prevent you from falling right back into the
    debt trap.

    November 22nd, 2010 at 4:20 pm


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