How to Consolidate Debt on Your Own
You have probably heard about debt consolidation services, but did you know that you can engage in debt consolidation on your own. It will take a bit of time and patience on your part, but you can take care of your debts by consolidating them all by yourself. You will have to be willing to work with your creditors to negotiate interest rates, and to map out how you will repay your debts. Here are some tips to get you through the process of debt consolidation.
Tip 1: Prioritize your bills
Create a full and comprehensive list of all of your creditors and the debts that you owe them. After you have created your list, indicate the bills in order of priority and what bills must be paid first and foremost.
Tip 2: Define your budget
You must assess what kind of income you have and you will have to create a budget. Your income should include any wages you are making, and state benefits you are receiving, any tax credits you might be getting, and all income that you can use as a resource. You will need to develop a personal budget to know what you can afford in order to pay your creditors. After you deduct the monies you need for your survival needs, you can use the remainder for paying off debts.
Tip 3: You have to talk to the creditors
Select the bills of top priority and start calling creditors. Find out if your creditor is still holding on to your account or if the account has been transferred and sold to any collection agency. If so, find out where it was sent so you can contact that agency. If the statute of limitations for collection has expired, you can send the collection agency an SOL letter requesting that they stop contacting you about the overdue debt.
Tip 4: Validate your debts with the collection agency
Forward a letter to the collection agency validating your debts and to make sure that you know what you owe. Do not send any money until you get validation that you have the right collection agency and the right amount for the debt in question.
Tip 5: Talk with collection agencies and creditors
Try to work out a reduced interest rate. Talk to creditors, explain your situation, and work on a low and reasonable payment you can afford. Be very careful that your payments for the month are not something too extreme. You have to be able to afford to make your payments.
Tip 6: Use balance transfers with zero interest rates to consolidate credit card Debts
Transfer balances of credit cards to another card with low interest rates. This will minimize your payments and reduce your interest. By putting several credit card balances on one credit card you only have to deal with one bill instead of several. When you opt to make a balance transfer, go for cards with extended introductory periods; this can give you the time you need to pay off your bills before the period ends. Watch out for fees associated with balance transfers. Finally, make sure that you do not apply for new credit cards or cancel any credit cards as you are paying off your debts: this can reflect negatively on your credit.
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