How to Consolidate Your Debts in Delaware
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Before you can make an informed decision about debt consolidation, you’ll need to evaluate your income as it compares to both your monthly bills and the types of debts you owe. If debt consolidation seems like a viable option for you, you’ll need to secure a Delaware debt consolidation loan in one form or another or enter into a debt management plan.
Written by Attorney Kassandra Kuehl.
Updated December 20, 2023
If you’re frustrated by mounting debt, unreasonable interest rates, and having to pay multiple creditors every month, you may benefit from exploring the debt consolidation process. You can generally choose to approach debt consolidation in one of two ways.
First, you can enter into a debt management plan in which a nonprofit credit counseling agency negotiates new payment plans for each of your debts. Instead of paying each of your creditors monthly, you’ll pay the agency and the agency will distribute your payment to your creditors.
Second, you can secure a new loan and use that line of credit as a balance transfer to pay the total amounts due on your existing debts. Moving forward, you’ll make a single monthly payment on your Delaware debt consolidation loan instead of making payments on multiple accounts.
In either scenario, you’ll likely benefit from a lower-interest rate and a lower minimum payment than you’re currently managing. Additionally, both arrangements help to streamline your debt so that you have fewer monthly payments to make. As a result, you risk fewer late payments and fewer late fees. When you make your Delaware debt consolidation loan monthly payments consistently and on time, this arrangement can help to improve your credit history and your credit score.
Learn More Through Free Nonprofit Credit Counseling
Obviously, debt consolidation offers many benefits to those who are responsible for paying multiple unsecured loans and debts every month. (Generally speaking, it doesn’t make sense to consolidate most secured debts, as they are long-term investments unlikely to be paid off quickly and/or already feature low-interest rates.) However, debt consolidation isn’t the best option for all financial circumstances.
To learn more about whether consolidating your debt is a good option for you personally, consider scheduling a free credit counseling session with an accredited nonprofit credit counseling organization in Delaware. All you have to do to meet with a credit counselor for free is schedule an appointment with an organization that offers this no-cost service. After assessing your income, spending habits, expenses, debts, and financial goals, your credit counselor will offer you a personalized action plan. This action plan may or may not include the recommendation that you consolidate many or all of your existing debts.
How to Consolidate Your Debts in Delaware
Before you can make an informed decision about debt consolidation, you’ll need to evaluate your income as it compares to both your monthly bills and the types of debts you owe. If debt consolidation seems like a viable option for you, you’ll need to secure a Delaware debt consolidation loan in one form or another or enter into a debt management plan.
Collect the Details About Your Debts
Making an informed decision about debt consolidation is a personal process. The right choice for you might not be the right choice for someone else. To accurately assess whether your personal finances can benefit from debt consolidation and whether you can make your monthly payments reliably, you need to scrutinize your debts, income, and household expenses. Gathering information about your debts first is generally a good idea because it’ll allow you to come up with a rough idea of which debts you might want to consolidate. You can then keep this information at the back of your mind as you’re evaluating your income and expenses. Depending on how you process information, educating yourself about your debts first can help to contextualize the rest of the data you’ll need to gather before making a decision. The easiest way to gather basic information about your debts involves requesting a free copy of your current credit report. In addition to providing your current credit score, your credit report will give you insight into all the debts you owe and the creditors you owe them to. Except for personal loans, all of your current debts should be listed on your report. Once you have this information, you’ll simply need to track down the interest rates you’re currently paying on your student loans, credit card debts, and any other unsecured loans you may be interested in consolidating. That way, you can compare your current rates to the interest rates of any consolidation loan options available to you.
Determine Your Monthly Income
It’s important to determine whether you have access to enough reliable income to make your loan payments on time each month before committing to debt consolidation. If you can’t make your monthly payments reliably, that challenge will hurt your credit, stress you out, and force you to deal with late fees. To get a clear picture of your income, take the past few months’ worth of your pay stubs and other income-related records and add them up. Make sure to identify which sources are reliable and which ones are irregular. Having irregular income doesn’t mean you can’t pursue debt consolidation. But you’ll need to assess just how much of your income is irregular and just how irregular it is before making an informed decision either way.
Put Together Your Budget
Calculating your income and gathering information about your debt are both relatively straightforward processes. Now comes the tricky part. Before you can accurately evaluate whether you can afford to make your debt consolidation loan payments reliably, you’ll need to assess your monthly expenses. In addition to fixed expenses, like rent or a mortgage payment, that occur every month in the same amount, you’ll need to consider unfixed and periodic expenses. Unfixed expenses (entertainment, electricity, food, etc.) happen every month but don’t cost the same every time. Periodic expenses happen every year but not every month. To factor this last category of expenses into your monthly budget, add up each annual cost and divide it by 12.
Do the Math
Add up your monthly household expenses and the minimum payment amount due on each of your debts. If your reliable income is greater than this total, you can probably proceed with debt consolidation confidently, as you’ll likely be saving money on interest and making a lower overall debt payment for your consolidated accounts. But if your minimum debt payments and expenses are greater than your reliable income, you’ll need to think carefully before committing to a debt consolidation plan. In general, if your calculations indicate that you should be able to reliably make a monthly consolidation payment, then debt consolidation may be a good option for you. If your math doesn’t add up in this way, you may want to explore alternative debt relief options like bankruptcy or debt settlement through a reputable debt settlement company.
Review Your Delaware Debt Consolidation Options
If you’d like to proceed with consolidating your debt, you’ll need to weigh the potential benefits and drawbacks of each consolidation option available to you. In general, you’ll need to secure a loan to act as a balance transfer or work with a nonprofit credit counseling agency to enter into a DMP. If you choose to transfer your debt balances to a new line of credit, you’ll need to evaluate whether a home equity loan, HELOC, unsecured debt consolidation loan, credit card balance transfer, or a personal loan will work best for your situation. If you’re not a homeowner, home equity loans and HELOCs won’t be an option for you. If you don’t have access to someone willing to lend you a hand, a personal loan isn’t a viable option. Chances are that an unsecured debt consolidation loan will be your best bet unless you have good credit and can secure a credit card balance transfer at a low-interest rate.
Apply for a Delaware Debt Consolidation Loan
Unless you’re entering into a DMP or you have access to a personal loan, you’ll need to apply for a new loan to which you can transfer your existing debt balances. No matter which type of loan you choose, make sure that its terms are fair, its origination fee is reasonable, and it isn’t a high-interest line of credit. You’ll also want to research the credentials and reputation of your lender before you agree to work with them. The last thing you want is to suffer the fallout of a debt-related scam. If you go to the website for the Better Business Bureau or the Delaware attorney general, you can access valuable information about your lender’s reputation and record.
How to Stay Current with Payments After Consolidating Your Debts in Delaware
When your debt consolidation process is complete, you’ll need to prioritize making your monthly payment on time. You can help yourself by scheduling your payment due date at a time of the month when you reliably have access to income. You’ll also want to track your spending so that you aren’t tempted to run up more credit card debt. Adjusting the budget you’ve already made as your finances evolve is important too. For example, if you choose to go back to school and need to take out more student loans, your budget will need to reflect the change so you can adjust your finances accordingly. Unexpected expenses are going to pop up from time to time. For example, the budget you made recently didn’t account for any origination fee or transfer fee you may have been charged when you signed up for a consolidation loan. By keeping careful track of your finances, your budget will be better able to absorb these unexpected costs.
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Delaware Debt Management Plan
To consolidate your loans, you don’t necessarily have to secure a new line of credit. If you have bad credit or you’d simply like to avoid working with another lender, you can consolidate your loans using a debt management plan. Constructing a Delaware debt management plan involves working with a credit counselor to negotiate new repayment terms for each of the debts you wish to consolidate. Instead of paying your creditors per the terms of your DMP, you’ll instead send your monthly payments to the agency, which will then pay each of your creditors in turn. A DMP usually results in a better interest rate and a lower monthly payment.
Delaware Debt Settlement
If you can pay a significant amount of your debt now and you’d like to avoid securing a new loan, you may benefit from pursuing debt settlement. Instead of working with a lender, you’d work with a reputable debt settlement company to negotiate with your creditors. Each creditor willing to settle your debt will indicate how much of your total amount due you’ll have to provide in a single payment to eliminate the remainder of your balance. For example, if you owe a $1,000 credit card balance, your creditor may be willing to forgive $250 of that balance if you can make a $750 debt payment all at once. This is how Delaware debt settlement generally works.
Delaware Bankruptcy
If you don’t have resources available to make debt settlement workable and debt consolidation doesn’t make sense for your financial situation because your debt is overwhelming, you may benefit from exploring debt relief solutions like filing for bankruptcy. If you don’t earn much money, not only could you be eligible for free filing assistance, you could become debt-free of your eligible unsecured debts in as few as 90 days. You can alternatively restructure your debt and have your eligible debt erased after a five-year payment plan is completed. Either way, bankruptcy may be a debt relief option worth considering.
