How to Consolidate Your Debts in Arkansas

Collect the Details About Your Debts

When was the last time that you requested a free copy of your credit report? If it has been more than a few months since you checked your credit history and credit score in this way, it’s a good idea to do so now. Your credit report provides you with an instant snapshot of what you owe and who your creditors are. Most of the time, the only debts that aren’t listed in credit reports are personal loans from family members or friends.

Your credit report won’t give you all the debt-related information you’ll need to make an informed decision about consolidation. You’ll need to consult your credit card debt statements, student loan statements, auto loan agreements, and other records to determine your interest rates and monthly minimum payments for each debt.

However, consulting your credit report is a great place to begin gathering necessary information before deciding whether to consolidate some or all of your debts.

Determine Your Monthly Income

Debt consolidation is usually only beneficial when debt consolidation loan payments are made on time. Otherwise, late fees are incurred when late payments are made, and other challenging consequences can arise. Generally, if you can’t reliably afford to make monthly payments on an Arkansas consolidation loan, you may be better served by exploring debt relief alternatives. How do you know if you can afford to consolidate your debt? Examine your income. How much do you make every month? Of all your sources of income, which are reliable, and which are irregular? Once you gather details about your income from recent pay stubs and other records, you can compare your income totals (both reliable and irregular ones) to your minimum debt payments and household expenses. These calculations will help you make an informed decision about what to do next.

Put Together Your Budget

The last step you’ll need to take before you can make an informed decision to consolidate your debt or not involves making a budget. You can use an online tool provided by your bank, a simple spreadsheet, a platform like Mint or old-fashioned paper to assess your household expenses. When determining how much money you spend each month, make sure to track periodic expenses in addition to your fixed and unfixed expenses. Fixed and unfixed expenses are incurred every month, whereas periodic expenses aren’t. To calculate how much you should budget for your periodic expenses, add up how much each costs per year and then divide by 12. For example, if you spend $144 each year on oil changes and tire rotations, you’d budget $12 monthly for this expense.

Do the Math

Now that you have detailed information concerning your spending habits, your income, and your debts, it’s time to compare your figures. If your reliable income could easily cover the cost of monthly debt payments for a consolidated loan, there is probably no reason to avoid consolidating your unsecured loans that have high-interest rates. As long as you pay your streamlined debt payment on time, consolidation will allow you to benefit from having a solitary, low-interest loan payment for the debts you choose to consolidate. By contrast, if your debt dramatically exceeds your income, you’ll probably want to hold off consolidating your loans and concentrate on securing debt relief that will allow you to build good credit over time. Finally, if your reliable income may allow you to make consistent payments on a debt consolidation loan but you’re unsure of what your loan terms would be, it may make sense to explore your refinance options and then make a decision once you have more information.

Review Your Arkansas Debt Consolidation Options

You have two primary debt consolidation options to choose from. You can enter into a DMP with a credit counseling agency or you can secure a new line of credit to use as a balance transfer. A third, less common option involves using an existing credit card account with a low credit card balance on it to serve as your balance transfer.

If you choose to use a credit card balance transfer on an existing account, watch out for high transfer fees. If you opt to use a personal loan, a home equity loan (called a HELOC) or an unsecured debt consolidation loan to consolidate your debt, be wary of unreasonable origination fees and high-interest rates.

It doesn’t make sense to consolidate your debt only to pay more in interest than you would if you paid off your debts independently. It is partially for this reason that most people avoid consolidating secured debts; they tend to have very low-interest rates to begin with.

Apply for an Arkansan Debt Consolidation Loan

If you need to take out a new line of credit to refinance your debts, you’ll need to research the reputation of any lenders you may be interested in working with. Unfortunately, too many companies use their influence to scam clients, so it’s important to make sure you’re working with a lender you can trust. Red flags you can identify immediately include overly aggressive sales tactics, promising results that are too good to be true, and the practice of sending you checks in the mail that you could potentially cash before contacting the organization. When you’ve identified a lender you’re interested in working with, consider double-checking that lender’s history on the website for either the Better Business Bureau or the Arkansas attorney general before entering into any agreements.

How to Stay Current with Payments After Consolidating Your Debts in Arkansas

Once your debt consolidation process is complete, you’ll want to track your budget carefully to better ensure you can always make your payments in-full and on time. If you can, you may benefit from setting up an automatic payment to take out of your account at a due date each month that works for you. You don’t want your credit score to suffer as a result of late payments now that you’ve made this productive step forward. Even if you’re repaying a personal loan instead of a home equity loan or another line of credit, that will show up on your credit report, so it’s important to remain current with your consolidation payments. Doing so will help you achieve the milestone of becoming debt-free that much faster.