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How to Consolidate Your Debts in Kansas

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In a Nutshell

Now it’s time for you to determine whether debt consolidation could potentially help you resolve your debt. If this option doesn’t end up being the solution you’re looking for, you can explore alternative money management and debt relief options that may be more appropriate for your circumstances.

Written by Upsolve Team
Updated February 19, 2020

If you are ready to start eliminating your family’s debt load, know that consolidating your debt may result in lower monthly payments, a faster payoff, and less stress than you are currently managing. Debt consolidation works by combining several unsecured debts into a single account. You’re then left with a single monthly debt payment instead of having to make numerous payments to various creditors. Consolidation can be particularly beneficial if you are carrying high-interest debt (like credit card debt) or you have difficulty staying on top of multiple bills with different payments and due dates. Through debt consolidation, you should be able to save money over time. First, you should be able to avoid getting hit with late fees or surcharges for missed payments because you will only have to send one payment each month. Second, many of the debt consolidation options available offer lower rates of interest than what your credit card company and other creditors might be charging you currently.

There are several ways to consolidate your debt, including taking-out a home equity loan or personal loan, transferring your credit card debt through a balance transfer, or enrolling in a debt management plan. Your credit score, debt types, and individual financial circumstances will determine which consolidation option will best help you to resolve your debt. 

Learn More Through Free Nonprofit Credit Counseling

Anyone with debt can benefit from meeting with a nonprofit credit counselor. When you meet with a credit counselor (during a free credit counseling session), they will review your income, expenses, and debt and work with you to create an individualized action plan to address your financial goals. Your credit counseling session will be confidential and will not cost you a dime. If you are interested in additional services, your credit counselor can refer you to other resources designed to help you with budgeting, debt management plans, etc. Ensure that you are working with a legitimate credit counseling agency by making sure that they are an accredited nonprofit credit counseling organization. If your credit counselor tries to charge you for the counseling session or promises to provide you with a Kansas debt consolidation loan, you should walk away from the table: reputable agencies offer counseling for free and don’t loan money.

How to Consolidate Your Debts in Kansas

Now it’s time for you to determine whether debt consolidation could potentially help you resolve your debt. If this option doesn’t end up being the solution you’re looking for, you can explore alternative money management and debt relief options that may be more appropriate for your circumstances.

Collect the Details About Your Debts 

In order to assess whether debt consolidation makes sense for your situation, you’ll need to understand the ins and outs of your debt - not just estimate your total indebtedness. To start this exercise, request a free copy of your credit report from at least one of the three major credit reporting bureaus. Your credit report will list your credit history and show you exactly what each of your creditors has reported about your current debt. You will use this information to determine your full debt burden. You may also want to purchase your credit score because knowing your credit score will help you estimate whether you can qualify for different consolidation options. 

When you receive your credit report, inspect it for any inaccuracies. Then, pull together your most recent invoices or bills for each of the creditors listed. Make a spreadsheet and insert into columns the following data for each creditor: (1) the type of debt you owe (student loans, credit card debt, etc.), (2) the interest rate being charged, (3) your minimum monthly payment, and (4) your balance.  From your list, identify those debts that you would like to resolve through debt consolidation. If some of your debt is manageable, has good borrowing terms, or is a long-term investment, you may not want to consolidate that debt.

Determine Your Monthly Income

You may know your annual salary, but do you know how much income remains available for your living expenses and debt repayments after taxes and payroll deductions (like health insurance or commuting costs) are taken out of your checks? As you do this exercise, only include income that is normal and regular. If your pay fluctuates each month (freelancers, contractors, etc.), you may want to use your lowest income month for this number. Since you’ll use your take-home income to analyze your budget and consolidation options, you don’t want to sabotage yourself by overestimating your income and ending-up short each month as a result. 

Find your most recent pay stub and confirm that it is representative of your normal paycheck. If, for example, you had unpaid time off, higher than usual payroll deductions, or earned more overtime than usual, find a recent pay stub that is more typical of your average earnings. 

Put Together Your Budget

The next step involves taking a long look at where you spend your disposable income and determining whether your monthly income can support your budget and paying off your debt.

Start by reviewing your last three months of credit card bills and bank statements. Analyze your spending and add columns in your spreadsheet for (1) fixed costs (those bills that are the same each month, like rent, internet services, health insurance, etc.) and (2) variable costs (bills that fluctuate from month-to-month, like gas, utilities, and groceries). If you identify expenses that can be reduced or eliminated, insert the (realistic) amount you can reduce that cost to each month. Add-up the amount that you spent on your fixed and variable costs to find your average monthly spending. At this point, go ahead and insert payments made on any debts you don’t plan on consolidating (like your auto loan) into your expenses. Leave out debt payments for any accounts you hope to consolidate. 

In addition to these monthly costs, try to capture any irregular expenses that don’t occur every month, like oil changes and medical co-pays. Identify as many of these costs as you can, add up how much each expense costs annually, and then divide by 12 to figure out how much you need to set aside each month for these expenses. Then, because unanticipated costs happen in life (your car breaks down or you need a root canal), calculate 10% of your monthly spending total and add that 10% into your monthly budget so that you have your bases covered when emergencies occur. This will be your monthly budget as you move forward.  

Do the Math 

This is the final step: pulling all the math together to determine whether debt consolidation is a good option to help you better manage your debt. Go back to your debt spreadsheet and get the total amount of the debt that you would like to consolidate in order to find your estimated total consolidation amount. In order to calculate your monthly payments on this debt, divide your “total amount due” by 60 (i.e, 12 monthly payments over five years). Bear in mind: your debt payments are just an estimate since interest and additional charges haven’t been factored in. Now, deduct your estimated monthly payment from this disposable income amount left over after you subtract your monthly expenses from your monthly income. If you’re able to balance your budget and your estimated monthly loan payments, then a Kansas debt consolidation loan may be a good option for you. 

Review Your Kansas Debt Consolidation Options

Your eligibility for debt consolidation options will largely depend upon your credit score and the types of debt that you are responsible for.

  • Credit Card Balance Transfers: You can reduce your high-interest credit card debt by applying for a credit card balance transfer card, which usually has a low promotional interest rate (perhaps as low as 0%). Be aware of two potential problems: (1) you may be charged a transfer fee, and (2) the interest rate may skyrocket and become variable after the promotional rate expires. 

  • Personal Loans: You may be able to get a personal loan from a bank or online lender if you have good credit. Personal loans don’t require much paperwork, can usually be processed in a few days, and charge a fixed rate. You can use the borrowed money to pay off higher interest debts, like auto loans, credit card debt, medical bills, and private student loans. The downside is that you may be charged an origination fee, application fee, and penalty fees for late payments. 

  • Home Equity Loans or Refinancing: If you’re a homeowner with a good credit score, you may be able to borrow against the value of your house by refinancing or taking out a home equity loan. These types of loans generally offer the best repayment terms, but they are risky because if you stop repaying your loan, the bank may repossess your home. 

  • Debt Management Plan (DMP): If you don’t want to take out a new loan, you may want to consider a DMP. With a DMP, you submit a single monthly payment to your credit counselor, and that money is then distributed to your creditors based upon a payment plan agreed-to by your creditors. Certain types of debts, like student loans, and tax obligations, can’t generally be paid through DMPs.

Apply for a Kansas Debt Consolidation Loan

Before you apply for a Kansas debt consolidation loan or debt management plan, it’s a good idea to investigate any potential lenders or nonprofit credit counseling agencies you may be interested in working with. To ensure that a company is trustworthy, you can check with the Better Business Bureau for any complaints or speak to a counselor from an accredited Kansas credit counseling agency for its recommendations. Once you’ve chosen a financial partner, make sure you fully understand any repayment terms being offered. You should be able to refer back to your debt spreadsheet to compare any loan terms (i.e., does the loan have a lower interest rate than you are currently paying) and to calculate your estimated payments. Remember to trust your gut: if the terms seem too good to be true, they probably are. 

How to Stay Current with Payments after Consolidating Your Debts in Kansas 

The key to successfully completing debt consolidation is making sure that you stay current on your loan payments. Here are a few strategies to stay motivated and on-budget. 

First, make sure that you are consistently submitting your loan on-time (and avoiding late fees!) by setting up an automatic payment through your bank. Most lenders will allow you to choose your own payment due date, so pick a day of the month that you know your checking account will have a large enough balance to cover your loan payment (for example, you may want to make your payment due on the 15th if your rent is due on the 1st). 

Second, if you find budgeting tedious, download a financial app (like Mint, Albert, or YNAB) and use it to help you monitor your spending and keep track of your budget. If you find yourself reaching for your credit card to pay for expenses, try withdrawing a specific cash amount each week and using that cash only for your daily expenses. 

Third, set aside money (in separate accounts) for two things each month: (1) your emergency fund, and (2) a “Funday” account. Both accounts are good for the soul. You’ll have peace of mind knowing that you are prepared for an emergency, and you’ll be guilt-free using your “Funday” account to reward yourself for hitting your financial goals.

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Kansas Debt Management Plan

Debt management plans (DMP), which are offered by some credit counseling agencies, are a non-loan based form of debt consolidation. When you enter into a Kansas debt management plan, your credit counselor will reach out to your creditors and design a repayment schedule that typically spans from three to five years. Under a DMP, you send one monthly payment to your credit counseling agency, which then distributes money to your creditors based upon your repayment schedule. A DMP may save you money because creditors may be willing to charge you a lower rate if you establish a pattern of timely payments.

Kansas Debt Settlement

Debt settlement is another way to obtain debt relief. A debt settlement company will negotiate with your individual creditors to provide a certain percentage of debt forgiveness in exchange for a lump sum payment that covers the remainder of your total balance due. Kansas debt settlement may work well if you have one or two significant debts. However, debt settlement can be risky because: (1) you may be charged late fees and interest while your debt settlement company and creditor negotiate; (2) creditors don’t have to accept a settlement offer; and (3) you may need to pay taxes on any debt that is forgiven. 

Kansas Bankruptcy

If you completed the debt consolidation exercise and found that you don’t have the monthly income to make repayments while covering your basic expenses, then declaring bankruptcy may allow you to get a fresh financial start. Filing for bankruptcy has its drawbacks (your credit score will be temporarily damaged), but it also helps protect you from creditor harassment and may protect you from losing certain assets (like your home). Before you make any big decisions, though, consider contacting Upsolve for more information and assistance concerning the Kansas bankruptcy process. That way, you’ll be able to make an informed decision about your options.

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