How to Consolidate Your Debts in Colorado
Upsolve is a nonprofit that helps you get out of debt with education and free debt relief tools, like our bankruptcy filing tool. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we'll never ask you for a credit card. Explore our free tool
If you’re interested in consolidating your debt into a single monthly payment, you need to determine whether this is a good option for your financial circumstances. If your debts, income, expenses, and habits all make debt consolidation an option for you, you’ll need to explore which kind of Colorado debt consolidation loan is right for your situation.
Written by Attorney Kassandra Kuehl.
Updated December 11, 2019
If you owe debt payments to multiple creditors, you could potentially benefit from getting a Colorado debt consolidation loan. Securing this type of loan will allow you to make a single monthly payment on your existing debts, instead of multiple payments. It will also likely allow you to pay off your debt at a far lower-interest rate and at a lower monthly payment rate than you’re paying on multiple accounts now. In addition to streamlining your debt repayment process and securing a better interest rate, the debt consolidation process can help you avoid multiple monthly fees on different accounts and numerous late fees if you’re having an unusually tight month budget-wise. This process doesn’t make sense for everyone. For example, if your debts are so overwhelming that you can’t afford a single, regular debt payment, you may need to seek alternative forms of debt relief. Similarly, you shouldn’t commit to this process without carefully evaluating your finances, your consolidation options, and the reputation of any lenders you’re interested in working with. However, if this process does fit the needs and limitations of your financial situation, and you honor your repayment terms, it can help you to raise your credit score and to eventually become debt-free.
Learn More Through Free Nonprofit Credit Counseling
One of the best ways you can make an informed decision about debt consolidation involves attending a free credit counseling session. Many accredited, nonprofit organizations in Colorado offer this service to anyone in need of financial guidance. During your credit counseling session, a credit counselor will ask you about your income, expenses, your spending habits, credit history, credit score, and the types of debt you have. After evaluating your financial situation, your counselor will give you recommendations for the best ways to move forward. These recommendations may include refinancing, a debt management program, bankruptcy, or debt consolidation. If debt consolidation is a viable option for you, you can ask your credit counselor any questions you may have about how debt consolidation works and any potential loan options available to you.
How to Consolidate Your Debts in Colorado
If you’re interested in consolidating your debt into a single monthly payment, you need to determine whether this is a good option for your financial circumstances. If your debts, income, expenses, and habits all make debt consolidation an option for you, you’ll need to explore which kind of Colorado debt consolidation loan is right for your situation.
Collect the Details About Your Debts
To accurately determine whether debt consolidation is a viable option for your circumstances, you’re going to need to gather highly-detailed information about your debt. You’ll need to know what kinds of debt you have, if each debt has a higher interest or lower interest rate than the debt consolidation loan you’re interested in getting, and the totals for each of your debt. You don’t need to decide right now whether to consolidate each of your debts. At the moment, you’re just gathering information so you can make an informed decision. You’ll want to request a free copy of your current credit report and maybe even your credit score to ensure that you have the most accurate information possible concerning your current debts.
Determine Your Monthly Income
Now that you have detailed information about what you owe, it’s time to examine what you earn. Debt consolidation isn’t generally a good option for individuals whose income is irregular or inadequate to cover their necessary monthly bills, as successful debt consolidation depends on reliable monthly payments. When gathering details about your income, make sure to take into account both regular and irregular sources of support. These can include wage-based income, governmental benefits, pension payments, child support, etc. Using recent pay stubs and other income receipts for the past 2-3 months, determine how much income you typically receive in a given month. You can’t determine whether debt consolidation is a good idea for you without an accurate sense of your income.
Put Together Your Budget
Before you can “do the math” regarding your debt consolidation options, you’ll need to make a budget of your household expenses. This budget should reflect fixed, unfixed, and periodic expenses. Fixed expenses (like auto loans, student loans, home equity loans, rent, insurance, etc.) don’t usually fluctuate more than a few dollars each month, if at all. By contrast, unfixed expenses (including medical bills, food, clothing, credit card balances, etc.) do tend to fluctuate from month to month. Finally, irregular expenses only occur occasionally. For example, renewing your driver’s license, purchasing a live Christmas tree, and buying gifts for your children’s birthdays only happens once or a few times each year. These expenses can be budgeted for by dividing their cost into fractions. For example, if a Christmas tree costs $40 and you only buy one once each year, you can divide the $40 by 12 to determine how much of your monthly budget goes to support that purchase.
Do the Math
Now that you know what you earn, what you spend on your household expenses, and detailed information about your debts, it’s time to determine whether pursuing debt consolidation makes sense for you. If your income stretches enough that you can pay both your expenses and your debts each month, that’s great. You may still want to consider debt consolidation in this scenario because you can potentially benefit from a low interest rate, a lower monthly bill payment for your debts, more favorable loan terms generally, and a streamlined approach to paying your debt. If your income stretches to cover your expenses and some of your debt burden each month, debt consolidation may be a great option for you. In addition to the benefits already noted, you can make the act of paying your credit card debt, medical bills, high-interest student loans, select personal loans, high-interest car loans, and other debt payments more manageable. If you don’t already have good credit, you can work towards that goal by paying your consolidated monthly debt bill reliably. If your debt is overwhelming and your income doesn’t even cover your necessary monthly expenses, you’ll want to consider scheduling a free credit counseling session to explore your options, as debt consolidation probably isn’t for you.
Review Your Colorado Debt Consolidation Options
If pursuing debt consolidation will help you reach your financial goals, know that there are a few ways you can approach this process. Most of the time, it makes sense to secure an unsecured debt consolidation loan, as it is a low-risk option when entered into with a reputable lender. Secured debt and real estate loans aren’t generally good candidates for consolidation anyway, as they tend to serve as long-term debt featuring low interest rates. With this kind of debt consolidation loan in place, you can combine unsecured debt (including credit card debt, medical bills, and personal loans with high interest rates) effectively and efficiently. Just make sure that your origination fee is fair and that your lender is reputable. You’ll use the loan as a balance transfer to immediately pay your existing debt. You can similarly treat alternative loan options as a balance transfer in this way. You can take out a personal loan, sign up for a home equity loan, secure a credit card balance transfer, initiate a debt management plan or get a HELOC. No matter which route you take, ensure that your origination fee is fair, the terms of the loan are fair, your repayment schedule is reasonable, and the expectations of the loan are clear before you commit to the debt consolidation process.
Apply for a Colorado Debt Consolidation Loan
You’ll want to apply for the debt consolidation loan type that best suits your circumstances. For example, if you have a fantastic relationship with your parents, they have no money troubles of their own and they’re willing to extend you a zero percent or low interest rate personal loan to consolidate your debt, you may benefit significantly from that generosity. If your home ownership history is stellar and you can gain access to a low interest home equity loan to serve as a balance transfer, that may be a great option for you. Whatever route you choose, make sure that the terms of your loan aren’t “too good to be true” because they probably are. Also, make sure that your lender has a stellar reputation so that you aren’t taken advantage of. If you ultimately determine that you can’t secure the kind of loan you want, you may want to look into a debt management plan. This kind of debt consolidation tool doesn’t require you to secure a new loan.
How to Stay Current with Payments After Consolidating Your Debts in Colorado
You may understandably be concerned about the possibility of going back into debt and/or defaulting on your consolidated loan agreement. Once you’ve experienced financial trouble, it’s normal to fear that you’ll find yourself in that position again. However, there are things you can do to better ensure that you remain current on your loan until it’s paid in full. For example, you can choose to set your payment due date to a time of the month that makes the most sense for you and your family. Perhaps you get paid every month on the first, so it makes sense to set your due date for the first week of the month. You have some flexibility in determining your due date, so use that to your advantage. Similarly, you can use any additional recommendations you received during your free credit counseling session to bring your finances “into line” as much as you can. That way, you’ll be less likely to miss a payment.
Upsolve Member Experiences
1,839+ Members Online
Colorado Debt Management Plan
One kind of debt consolidation that doesn’t require a Colorado debt consolidation loan is called a debt management plan. This process allows you to consolidate and pay your debt in a single monthly payment, but you won’t need to take out new credit to accomplish this feat. Instead, a nonprofit credit counseling agency will negotiate with your creditors to create reasonable payment plans. You’ll then pay the agency your single payment each month. The agency will distribute portions of that payment to your creditors per the terms of your Colorado debt management plan.
Colorado Debt Settlement
Debt settlement is a tool that should only be used sparingly. Unfortunately, many debt settlement companies are scammers, so it can be difficult to find a reputable debt settlement company. Debt settlement also requires your creditors to voluntarily agree to this approach. However, you may want to consider a Colorado debt settlement process if you don’t have many creditors and you already have bad credit, but you have significant funds available presently to make lump sum debt settlement payments. Debt settlement isn’t usually a good option because it’s risky and requires you to pay significant portions of debt at once. But if your situation meets certain criteria, it could be an option for you.
Colorado Bankruptcy
If you’re more in need of debt relief than debt consolidation, filing for bankruptcy may be an option worthy of your consideration. Bankruptcy tends to be the most beneficial path forward for individuals whose debt is so overwhelming that their income can’t stretch to reliably cover even a single monthly payment. If your budgeting revealed that you’re in this situation presently or could be soon, consider researching the process of filing for Colorado bankruptcy. If you don’t earn much income, you may even be able to file without investing in an attorney’s assistance, as there are resources available to help you navigate this process.
