How to Consolidate Your Debts in Arizona
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If you think debt consolidation might be a good way to improve your credit history, access lower interest rates, and streamline your debt repayment process, you’ll want to carefully examine your finances. If your income will support regular monthly payments of an Arizona debt consolidation loan, you’ll need to evaluate your consolidation options and choose the one that will work best for your financial situation.
Written by Attorney Kassandra Kuehl.
Updated December 11, 2019
When your bills are piling up and you are struggling to meet your household expenses and pay your debts at the same time, it can be tempting to stick your head in the sand and ignore your financial challenges. However, doing so will likely lead to damaged credit history, a low credit score, late payments, mounting late fees, high-interest rates, rising credit card debt, and no end in sight. If you’re struggling to pay your monthly bills and your debt payments at the same time, there are solutions available to you. One option worthy of your consideration is debt consolidation. This process isn’t the best choice for every situation, but it can be helpful under most circumstances. Debt consolidation works by combining your debts so that you’re only making a single payment each month for the debts you’ve consolidated. You can consolidate your debts by entering into a debt management plan or by securing an Arizona debt consolidation loan to use as a sort of balance transfer. Either way, you’ll likely benefit from a lower monthly payment on your debt, a lower interest rate than you’re paying now, and a streamlined approach to eventually becoming debt-free. As long as you can make your consolidation loan monthly payment reliably, chances are that debt consolidation may be a good option for you.
Learn More Through Free Nonprofit Credit Counseling
Attending a free credit counseling session at a nonprofit credit counseling organization located in Arizona will help you determine whether debt consolidation is a good idea for your financial situation. This no-cost service allows a credit counselor to examine your income, monthly bills, and debt burden. Once the counselor has evaluated your personal finances, they will make recommendations for next steps that are unique to you and your circumstances. Depending on your situation, your counselor may recommend that you consolidate your debt, look into debt settlement, or consider filing for bankruptcy. The choice to follow these recommendations or to make an informed alternative decision will be left entirely up to you.
How to Consolidate Your Debts in Arizona
If you think debt consolidation might be a good way to improve your credit history, access lower interest rates, and streamline your debt repayment process, you’ll want to carefully examine your finances. If your income will support regular monthly payments of an Arizona debt consolidation loan, you’ll need to evaluate your consolidation options and choose the one that will work best for your financial situation.
Collect the Details About Your Debts
You can’t determine which debts to consolidate until you gather information about each of your debts. By determining exactly how much you owe, your interest rates, the repayment terms of your debts, how much of your debt is unsecured loans, and other important information, you’ll be able to make informed decisions regarding whether to consolidate your debts and (if you move forward with this process) which debts to consolidate. An easy way to gather the basics of what you owe is to access a free copy of your credit report. Except for personal loans, your credit report will be able to tell you what you owe and what your current credit score is. You may need to dig into each account for more detailed information, but accessing your credit report is a good place to start.
Determine Your Monthly Income
Once you’ve gathered information about what you owe, it’s time to carefully examine what you earn. The key to a successful debt consolidation process is the ability to make monthly payments for your Arizona debt consolidation loan on time, every time. This approach will help you to heal any damage that your debt may have caused to your credit history and your credit score. It will also help you become debt-free faster. Not making on-time payments will hurt your credit score and result in late fees and other penalties, so you want to make sure you have access to enough reliable income to cover your minimum payment each month. As you examine recent pay stubs and other income-related records, make sure to identify which sources of income are reliable and which are irregular. Even if you make a good living, if your income isn’t steady, it may be difficult to make your loan payments on time each month.
Put Together Your Budget
Finally, you’ll want to examine your household expenses and monthly bills. Budgeting for fixed expenses that occur each month, as well as unfixed and periodic expenses, will allow you to accurately assess whether you can afford a monthly debt consolidation loan payment. You can use a spreadsheet to track your spending habits or an online tool like Mint. Or you can simply write down each of the expenses you incur each month that cost the same every time (fixed expenses) and those that don’t (unfixed expenses). After you’ve accounted for your monthly expenses, calculate those irregular expenses that you incur every year but not monthly. For example, you may get three oil changes a year. Add up how much those oil changes cost annually and divide that number by 12 for your monthly budget figure.
Do the Math
Now that you have the details of your income, debt, and expenses in front of you, you can make an informed decision about whether debt consolidation makes sense for you and your family. If you have access to enough reliable income to cover your expenses and a monthly consolidation loan payment, you can probably pursue debt consolidation with confidence. But if your student loans, medical bills, credit card debt, personal loans, existing home equity loans, auto loans, and other burdens are so great (or your income is very unreliable) that debt consolidation isn’t a good idea right now, don’t panic. You can explore alternative money management solutions and debt relief options including debt settlement and bankruptcy.
Review Your Arizona Debt Consolidation Options
When determining which approach to debt consolidation will work best for your situation, remember that you can either enter into a DMP or take advantage of several loan options. If you’re a homeowner, you can explore using a home equity loan or HELOC as a balance transfer. If you have supportive loved ones, a zero-interest or low-interest personal loan may be an option. If you have excellent credit, you may be able to secure a credit card balance transfer to facilitate consolidation. However, chances are that an unsecured debt consolidation loan will be your best, least risky, and most widely available alternative. No matter which type of loan you choose for refinancing purposes, make sure that its repayment terms and origination fee are fair. Also, think twice about consolidating any debt that has a lower interest rate than your consolidation loan does. You may have fewer payments to make, but if you’re going to pay more interest in the long-run, you may want to exclude that debt from consolidation.
Apply for an Arizona Debt Consolidation Loan
If you’re not using a personal loan as a balance transfer or entering into a DMP, you’ll need to apply for a line of credit that you can use to consolidate your debt. It’s important to understand that while the debt consolidation process can be very beneficial, it can also be very risky if you don’t work with a reputable lender. Too often, scammers charge outrageous transfer and origination fees and otherwise take advantage of their clients while promising them loan terms that are too good to be true. Before applying for a debt consolidation loan, take some time to research your lender’s reputation on the Better Business Bureau’s website and the website of the Arizona attorney general. Researching your lender’s history of behavior now may save you time, money, and headaches later on.
How to Stay Current with Payments After Consolidating Your Debts in Arizona
Once your debt consolidation loan has been negotiated, it’s time to start focusing on paying that loan on time every month. Just as your credit takes a hit when you miss a student loan payment and your credit is positively impacted when you make a home equity loan payment on time, your consolidation loan repayment history can help you or hurt you. You may want to consider setting up an automatic payment on a due date that works for your family. That way, you can ensure that your payment is being made on time, every time. If automatic billing doesn’t work for you, just keep an eye on the calendar and your budget so you can prevent late or inadequate payments from happening.
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Arizona Debt Management Plan
There is a form of debt consolidation that doesn’t involve securing a line of credit. A debt management plan is usually created when a nonprofit credit counseling organization negotiates with a client’s creditors on their behalf. Once new payment plan terms have been reached, the client then sends a single monthly payment to the agency, not their creditors. Instead, the agency distributes the client’s funds to their creditors per the terms of the Arizona DMP. This option works well for individuals with damaged credit who can’t secure a balance transfer via a new loan. DMPs usually result in a lower monthly payment and better interest rates than clients are currently paying.
Arizona Debt Settlement
If your income is so irregular that debt consolidation doesn’t make sense for your financial situation but you have access to enough money that you can pay a significant portion of your debt right now, you might want to consider debt settlement. Arizona debt settlement involves paying a large fraction of the debt you want to settle in a single payment in exchange for forgiveness of the remainder of your total amount due. Generally, you need to work with a debt settlement company to effectively negotiate with your creditors. However, many debt settlement companies scam their clients, so research your options carefully before committing to a debt settlement contract.
Arizona Bankruptcy
If your debt is so overwhelming that you can’t reliably make monthly debt consolidation payments and you don’t have funds available for debt settlement, you may want to think about filing for bankruptcy. Filing for Arizona bankruptcy will allow you to benefit from significant debt relief, will help you to cultivate good credit over time, and may even allow you to become debt-free. If you don’t earn much income, you may be eligible for free filing assistance. Otherwise, speaking with your credit counselor can help clarify whether this debt relief solution may be right for you.
