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How to Consolidate Your Debts in Arkansas

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In a Nutshell

If you’re interested in exploring your consolidation options, it’s important to begin by evaluating whether you can afford to make timely monthly payments on whatever type of loan or DMP makes sense for your situation. Then, you’ll need to research the reputation of the lender you want to work with and settle on a loan option or alternative refinancing arrangement.  

Written by Attorney Kassandra Kuehl
Updated March 25, 2024


If you make multiple debt payments every month, you may benefit from consolidating those debts into a single monthly payment. The process of debt consolidation allows individuals and families to benefit from streamlined debt repayment terms that often feature lower interest rates and lower minimum payments on their debts than they are required to make currently.

Although debt consolidation can be especially helpful for individuals struggling to pay their monthly bills and make multiple monthly payments on their debts, the benefits of debt consolidation can extend to anyone working to pay off several unsecured debts at once.

Debt consolidation works in two ways. Individuals can work with a credit counseling agency to negotiate a debt management plan with their creditors. When debt consolidation is set up through a DMP, an individual makes a single monthly payment to the agency and the agency distributes the payment to that client’s creditors.

However, most Arkansans choose to secure an Arkansas debt consolidation loan or a credit card balance transfer. In this scenario, the new line of credit is used to pay the individual’s existing debts. Then, that individual is left with a single monthly payment instead of bills for credit card debt, medical bills, student loans, personal loans, and other unsecured loans that must be made separately.

Learn More Through Free Nonprofit Credit Counseling

Your financial situation is unique. Debt consolidation may be an excellent option for you or you may be better served by exploring alternatives like securing debt relief through debt settlement or bankruptcy.

To ensure that you’re making an informed decision about debt consolidation, you may want to schedule a free credit counseling session with an accredited, nonprofit credit counseling organization in your area. During your no-cost, no-obligation session, you’ll meet with a credit counselor. That counselor will spend approximately 45-60 minutes reviewing your financial information and asking you questions about your income, spending habits, and the types of debt you owe.

At the end of your meeting, your counselor will provide you with personalized recommendations for your next steps. These recommendations may include securing an Arkansas debt consolidation loan or entering into a DMP.

How To Consolidate Your Debts in Arkansas 

If you’re interested in exploring your consolidation options, it’s important to begin by evaluating whether you can afford to make timely monthly payments on whatever type of loan or DMP makes sense for your situation. Then, you’ll need to research the reputation of the lender you want to work with and settle on a loan option or alternative refinancing arrangement. 


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.

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Arkansas Debt Management Plan

An alternative debt consolidation option that doesn’t involve securing a new loan involves working with a nonprofit credit counseling agency to create a debt management plan. When setting up an Arkansas debt management plan, a credit counselor will negotiate new payment plan terms for your existing debts. Often times, these revised payment plans have better interest rates and lower monthly payments than you would otherwise be paying. Once agreed to by your creditors, the credit counseling agency will administer the plan. Meaning, you’ll make your consolidated monthly payment to the agency, which will then divide the payment to be distributed to your creditors per the terms of your DMP.

Arkansas Debt Settlement

If you either can’t or don’t want to take out a new loan and you have significant funds available now to pay off portions of your debt, you may want to consider debt settlement. The debt settlement process usually involves working with a debt settlement company to negotiate new repayment terms for your debts. Specifically, the debt settlement company will encourage your creditors to settle the remainder of your total amount due if you pay a sizeable portion of it as a single payment. However, many debt settlement opportunities are scams, so it’s important to thoroughly research your options before committing to working with an Arkansas debt settlement agency.  

Arkansas Bankruptcy

If, after you assess your income, debt, and expenses, it becomes apparent that your debt load far exceeds your ability to reliably pay your creditors, it may be time to file for bankruptcy. There are many resources available that are designed to help individuals in your situation make the best out of this debt relief process. If you don’t earn much income, you may even be eligible for free filing assistance. If you haven’t yet spoken to a credit counselor about filing for Arkansas bankruptcy, it might significantly benefit you to do so now.



Written By:

Attorney Kassandra Kuehl

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Kassandra is a writer and attorney with a passion for consumer financial education. Outside of consumer law, she is focused on pro bono work in the fields of International Human Rights Law, Constitutional and Human Rights Law, Gender and the Law. Kassandra graduated from Universi... read more about Attorney Kassandra Kuehl

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