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How to Consolidate Your Debts in Louisiana

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In a Nutshell

The next few sections will walk you through the process of determining whether debt consolidation is a good fit for you. Not to worry, if you finish the exercise and decide that debt consolidation isn’t a good fit for you, the remaining sections discuss other debt relief options. 

Written by the Upsolve Team
Updated December 16, 2019

If you’re struggling under the weight of debt, you don’t need to rely on good luck from finding the baby in this year’s king cake to tackle your financial situation; instead, you can use some of the options described in this article.  

The process of debt consolidation allows you to combine debt from a number of different sources (like student loans, auto loans, medical bills, credit card debt, etc.), which you then repay through a single monthly payment. Debt consolidation can be particularly effective if you have a steady stream of income, but you have difficulty keeping track of your bills and due dates because, once you consolidate your debt, you only have to remember to pay one creditor each month for all of that combined debt. In addition, you may also be able to save a good chunk of change since many debt consolidation options offer lower interest rates than what you may be paying on credit card debt or other personal loans. 

There are several ways to consolidate debt, including taking-out personal loans or home equity loans, credit card balance transfers, and debt management plans. If you have just one or two large creditors, you may hire a debt settlement company to negotiate with your creditors to accept less than the full amount owed. The debt consolidation options available to you will depend upon your credit score and the type of debt you owe. Whichever option you choose, though, they all offer you a way of becoming debt-free, which is everyone’s ultimate goal.

Learn More Through Free Nonprofit Credit counseling

Regardless of your financial situation, if you have debt, it’s a great idea to meet with a credit counselor - especially since credit counseling is free and confidential. When you sit down with a credit counselor, they will review your income, expenses, and debt and talk to you about your financial goals. From there, you will work together to design an action plan to make your goals a reality. Your credit counselor may also be able to provide you with additional services and information, like creating a debt management plan or budget counseling. 

Bear in mind that credit counseling agencies are not banks and can’t lend money or provide you with a debt consolidation loan. If your credit counselor hints that they can provide those services, it’s best to walk away since they are likely not a legitimate agency. To avoid getting involved with a scammer, make sure that you are dealing with a legitimate nonprofit credit counseling agency accredited by the National Foundation for Credit Counseling (NFCC) before you meet with any credit counselor. 

How to Consolidate Your Debts in Louisiana

The next few sections will walk you through the process of determining whether debt consolidation is a good fit for you. Not to worry, if you finish the exercise and decide that debt consolidation isn’t a good fit for you, the remaining sections discuss other debt relief options. 

Collect the Details About Your Debts

It may seem obvious, but the first step in determining whether debt consolidation will work for you is determining the total amount of your debt and identifying all of your creditors. The ultimate goal of this exercise is to create a list that shows:

  • The type of debt you owe (student loans, credit card debt, other unsecured or secured loans, etc.)

  • the interest rate being charged

  • Your monthly payment

  • Your balance

  • Your account status (whether you're up-to-date on the bill

The easiest way to find all of this information is to pull together your bank statements, invoices, and credit card bills for the last few months. This information should be on the notices and bills you receive from your creditors. If it’s not, you should call their billing departments to get the most current information. Now, look at your list and highlight those debts that you would want to consolidate through a loan or payment plan.

The second step in this exercise is double-checking your work by requesting a copy of your credit report. You can obtain your credit report for free once a year from the three credit reporting bureaus (Equifax, Experian, and TransUnion). This document will show you how your creditors are reporting your debt and it will contain information about your credit history.

Look it over to make sure that you haven’t mistakenly forgotten about any outstanding debts. And, while you’re at it, you may as well request your credit score, which is available for a small fee from the credit bureaus and possibly for free from your credit card company. 

Determine Your Monthly Income

After you’ve determined the debt that you would like to consolidate, you need to calculate your take-home monthly income. This calculation will help you analyze your budget and decide whether debt consolidation makes sense.   

In this step, you will again need to collect some financial documents. Find and review your last two or three paycheck stubs. Is the income that you earned representative of your normal paycheck? In other words, did you earn more or less than you usually do? Why? If you worked extra hours or received a bonus or commission, use a paycheck that is more typical of your usual earnings. Because you will use your monthly income to set your budget, you only want to include regular income so that you don’t sabotage yourself by overestimating how much money you can spend each month. 

Using that pay stub, find the line item called “Net Pay.” This is the amount that you received after taxes and payroll deductions, and this is the amount that you will use to calculate your monthly income. How frequently are you paid? Use the following table to find your net annual income:

  • If paid weekly, multiply your “Net Pay” by 52;

  • If paid bi-weekly (every other week), multiply your “Net Pay” by 26;

  • If paid bi-monthly (twice a month), multiply your “Net Pay” by 24; or 

  • If paid monthly, multiply your “Net Pay” by 12. 

Next, divide your net annual income by 12 to find your net monthly income. Again, if you sometimes earn a bonus or commission or receive child support/alimony, your calculated monthly income may be less than your actual monthly income. This is fine. It’s better to be conservative in your estimates and have more money available than you thought than to overestimate and be short. 

Put Together Your Budget

At this point, you know how much you owe and how much you make, but do you really know how much you are spending each month? Creating a budget will help you understand where your money is going and ensure that it’s going to where it needs to be.

First things first, go back to your spreadsheet and create a new column for your monthly bills. Identify those bills that don’t fluctuate very much each month (like your rent, mortgage, cell phone, etc.) and input those fixed costs. Then, take a look at your last few months of credit card and bank statements for input those expenses that are a bit more variable (utilities, groceries, gas, entertainment). You may even want to categorize your expenses so that you can get an estimate of how much you really are spending each month on things like dining out or ride-sharing services. See how these costs compare with your earnings - do you see any areas for cost savings? 

In addition to your normal monthly expenses, you also need to account for irregular expenses that you pay for once a year or every few months (think: car registration and inspections, oil changes, medical exams, holiday travel, etc.). Add-up those costs and divide by 12 to see how much additional money you need to allocate in your monthly budget to cover those costs over the course of the year. Finally, your budget should also include money for emergencies. Plan to set aside an additional 10% to cover unanticipated costs. The key is to be realistic: if you make a budget that you can’t stick to, you’ll just end up frustrated.   

Do the Math

You’re almost there: the final step in determining whether a Louisiana debt consolidation loan is a good loan option for you is determining what income, if any, you have available to make loan payments. Go back to your debt spreadsheet and total all of the debt that you would want to consolidate. This sum represents your loan amount. In order to figure out your monthly loan payments, divide your “loan amount” by 60 (i.e., 12 monthly payments over five years). Since we haven’t factored in any interest or origination fees, this calculation is an approximate number, but it gives you something to work with. Now, deduct your calculated loan payment from your monthly income. How much do you have left-over after you make those payments? Does it cover the budget that you designed? If not, can you eliminate or reduce any other spending? If you’re able to balance your budget and your monthly loan payments, then debt consolidation may be a good option for you. 

Review Your Louisiana Debt Consolidation Options

Depending upon the type of debt that you owe and your credit score, you may be eligible for a number of different debt consolidation options.

  • Credit Card Balance Transfers: If you are carrying a large credit card balance with a high-interest rate, then moving this debt to a balance transfer card is a great way to lower your minimum payment and overall debt. These offers usually have a very low (close to 0%) promotional interest rate that may allow you to quickly chip-away at your credit card debt. Your credit score and line of credit will determine how much you can balance transfer. Beware that you may have to pay a transfer fee, and the interest rate may increase dramatically after the promotional rate expires. 

  • Personal Loans: If you have good credit, you may be able to get a new loan from a bank, credit union, or online lender. You can then use this money to pay off different types of debt, including car loans, credit card debt, medical bills, student loans, or other personal loans. These types of personal loans are generally easy to apply for and don’t require a ton of paperwork, but you may be charged an origination fee, application fee, or other charges.  

  • Home Equity Loans or Refinancing: If you own a home that has equity (i.e., its value is more than you owe on it), then you may be able to borrow against this equity through either a home equity loan or a refinance of your mortgage. These types of loans generally offer the best repayment terms (lower interest rates and longer loan terms), but they also are administratively expensive (you’ll have to pay for an appraisal, origination fee, legal fees, and recording fees) and you run the risk of losing your home if you stop repaying your loan. 

  • Debt Management Plan: A debt management plan (DMP) is a tool offered by credit counseling agencies that allows you to repay unsecured debt over a period of three to five years. 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 repayment schedule agreed-to by your creditors. Your access to credit will generally be limited while you are enrolled in a debt management plan. 

Apply for a Louisiana Debt Consolidation Loan

If you’re interested in applying for a Louisiana debt consolidation loan, you can get additional information and other debt relief resources from an accredited Louisiana credit counseling agency. A legitimate credit counseling agency should also be able to provide you with information about debt management plans if it turns out that consolidation through a new loan isn’t realistic due to bad credit. As with any financial interaction, trust your gut. Make sure that you understand the terms of any loan and refer to your debt spreadsheet to ensure that the loan will actually result in a lower monthly payment. If a deal seems too good to be true, or the lender is aggressive or asking for money up-front, don’t feel badly about walking right out the door. If you have any doubts about a financial partner, you can check with the Louisiana Attorney General’s office or the Better Business Bureau for any complaints or warnings about the company. 

How to Stay Current with Payments After Consolidating Your Debts in Louisiana

Once you’ve consolidated your debt, your success will largely hinge on your ability to make appropriate and timely payments. Below are a few strategies to help you avoid obstacles to becoming debt-free.    

  • Automatic Loan Payments: Set it and forget it! Schedule your debt payments for a day that you know your bank account should have sufficient funds and then set-up automatic bill pay to eliminate the possibility of a late payment.

  • Monitor Your Spending: Debt consolidation works best when you have your spending habits under control. Use technology to help you! You can use apps like Mint or Albert to help you keep track of your budget and alert you when you’re reaching your limit. 

  • Consider Using Cash: If you consolidated credit card debt, you probably freed up some credit that’s now available to you - don’t be tempted to use your cards! You don’t want to be making payments on your old debt and accruing new high-interest debt. Rather than a credit card, try taking out a certain amount in cash each week and only using that amount for your discretionary spending.

  • Plan for the Unexpected: It sounds silly to say, but it’s just a fact of life that we can’t plan for all eventualities. You will likely have some emergency occur, and if you’ve set aside money each month (say 10%) in a dedicated emergency fund, then you’ll be better prepared to handle a truly unexpected expense. Knowing that you have money set aside will also reduce the stress of an otherwise stressful situation. 

  • Reward Yourself: Paying off your debt is hard, but it shouldn’t be drudgery. Try to make a game of it and set specific targets or milestones for yourself. When you reach those milestones, reward yourself with a little indulgence (go out for a nice meal, get a massage, buy new running shoes, etc.) - whatever brings you some joy (in moderation).

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Louisiana Debt Management Plan

In addition to counseling, some credit counseling agencies offer debt management plans, which is another debt consolidation tool. Rather than taking out a loan or new line of credit, your credit counselor will negotiate a payment schedule with your creditors. So, while you will still have outstanding debt to all of your creditors, you get the benefit of only having to submit a single monthly payment to your credit counseling agency, which then distributes money to your creditors based on the agreed-upon payment schedule. In addition, your creditors may agree to charge you a lower rate or waive certain fees (like late fees) if they can see that you are making a genuine effort to timely repay.  If you have largely unsecured debt and the ability to commit to a payment plan, then a Louisiana debt management plan may help you achieve a fresh start.

Louisiana Debt Settlement

If you have some assets and only one or two creditors that are causing you a headache, then debt settlement might be a good option for you. Under those circumstances, you would hire a debt settlement company to negotiate on your behalf to reduce the amount that you owe. Unlike debt consolidation where you have a repayment schedule, with debt settlement, you will be expected to provide an immediate single payment in full of whatever amount is agreed to by your creditors. Choosing to negotiate a Louisiana debt settlement can be risky because the process can be lengthy (and you will be incurring interest, costs, and fees during the entire period) and there is no guarantee that your creditor will ultimately accept a settlement offer. Given the risks, it’s a good idea to research debt settlement companies using the same tools you used to vet your consolidation loan provider.  

Louisiana Bankruptcy

While bankruptcy is certainly a serious step, in some financial situations it might be your best option to getting a fresh financial start. For example, if your debt is more than 40% of your annual income and you are so overwhelmed with debt that meeting your basic expenses has become impossible. Filing for Chapter 7 bankruptcy may provide you with much-needed relief. Similarly, if you need a way to reorganize your mortgage payments and stop foreclosure, filing a Chapter 13 bankruptcy may be beneficial. Bankruptcy is a critical financial tool that can (and should be) used to protect you from creditors and help you get out from under your debt. If you are considering filing a Louisiana bankruptcy, Upsolve can provide additional information and assistance with your bankruptcy. 

Written By:

The Upsolve Team

Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.

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