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How to Consolidate Your Debts in Massachusetts

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In a Nutshell

If you are ready to pursue Massachusetts debt consolidation, please review this step by step guide to consolidating your debts. You’ll start by collecting the details on your debt, explore why it’s important not to rely on an irregular income when determining whether you can manage a debt consolidation payment, prepare a budget and locate a lender or agency to manage your debt consolidation process. 

Written by Upsolve Team
Updated February 11, 2020

If you live in Massachusetts and are in the midst of a financial setback, a Massachusetts debt consolidation loan or debt management plan may be able to help you regain your financial footing. Debt consolidation works by restructuring high-interest debts so that you only have to make a single monthly payment. There are many forms of debt consolidation. Debt consolidation can be accomplished with or without securing a new line of credit. For example, an unsecured debt consolidation personal loan is usually a great option but it is also one of the hardest options to get approved for and usually requires good credit and a high credit score. You can also try securing a home equity loan or refinancing your mortgage. Both are popular options that usually come with low-interest rates. But both of these options put your home at risk if you default on your mortgage or line of credit, may result in numerous additional fees, and they usually take a significant amount of time to obtain. Finally, a credit card balance transfer is one of the most straightforward ways to streamline your debt. But again, you usually have to have good credit for this to be a viable option. Additionally, many credit card balance transfers come with risky promotional rates that increase substantially if the balance is not paid off before the promotional period ends.

A debt management plan is another form of debt consolidation that does not require securing a new loan, having good credit, putting your home at risk or relying on deceptively low promotional interest rates. A debt management plan consolidates all your unsecured debts into one single monthly payment, which you then pay to an agency which distributes your funds to your creditors per the terms of your DMP. In addition, your credit counselor may be able to get your creditors to waive over-the-limit and late payment fees, lower the interest rate on your consolidated debt and re-age past due accounts

Learn More Through Free Nonprofit Credit Counseling

Did you know that you can learn more about debt consolidation and other money management tools free of charge? Free, non-profit credit counseling is available in Massachusetts through accredited, non-profit credit counseling agencies. Credit counseling is designed to benefit anyone looking to get out of debt and/or get better control of their finances. A non-profit credit counseling session can provide you with an action plan to help you manage your debt and otherwise manage your finances successfully. During the session, your non-profit credit counselor will work with you to assess your current financial situation and create a personalized action plan to help you achieve your financial goals. There is no cost for the initial credit counseling and, if you want, most credit counselors will offer to review your credit history and credit score with you as well.

To get a more thorough explanation of how debt consolidation works and what type of debt consolidation would be best for you specifically, request a risk-free, no-obligation, free credit counseling session with an accredited non-profit credit counseling agency such as Money Management International, CESI or Green Path. For help finding an accredited non-profit credit counseling agency in your area, feel free to contact Upsolve.

How to Consolidate Your Debts in Massachusetts

If you are ready to pursue Massachusetts debt consolidation, please review this step by step guide to consolidating your debts. You’ll start by collecting the details on your debt, explore why it’s important not to rely on an irregular income when determining whether you can manage a debt consolidation payment, prepare a budget and locate a lender or agency to manage your debt consolidation process.

Collect the Details About Your Debts 

If you have not yet thought about the debts you would like to consolidate, a good place to start involves assessing the type of debt consolidation loan you’ll be using to restructure your debt. Personal loans, home equity loans, and refinancing your mortgage will usually allow you to consolidate whatever debts you want. Credit card balance transfers will usually only allow you to consolidate balances from other credit cards. A debt management plan will primarily consolidate certain unsecured debts. Once you decide which debts you would like to consolidate, you will need to collect certain details about each of these debts. You’ll want to track down such information as who you owe, how much you owe, your minimum monthly payment, your annual interest rate, late fees, over-the-limit fees and any other loan terms that might be important to determining whether you want to consolidate any particular debt. You should also obtain a free copy of your annual credit report. Not only will it include much of this information but it will also ensure that you do not leave out any debts you may have forgotten about.

Determine Your Monthly Income

After you have collected all the details about your debts, you should work out your regular monthly income. Regular monthly income is the income you receive every month without fail. When assessing your regular income, you won’t include overtime, sick pay, holiday pay, or bonuses as these are not income sources you benefit from every single month. Nor would you include “irregular income” like commissions, freelance pay, and child support or alimony if these payments aren’t received on a monthly basis like clockwork. Generally speaking, the best measure of your regular monthly income is the pay reflected in your two most recent paychecks. Just make sure not to include any overtime or special pay in your calculation. 

Put Together Your Budget

In this section, you will come up with some figures that you will need to determine whether Massachusetts debt consolidation makes sense for you. These figures include your total debt, current total monthly debt payments, and disposable income after accounting for fixed and variable expenses that do not include debt payments on the accounts you hope to consolidate.

In order to calculate these figures, you will need to create a budget. A budget is a snapshot of all the regular income you bring in every month and all the expenses you pay out. By subtracting your total expenses from your regular monthly income, you will get your disposable income minus any debt payments you make on the accounts you want to consolidate. Ideally, this is the amount of funds you have available every month to make your Massachusetts debt consolidation loan payment. In the next section, we will work out what that payment might be.

Do the Math

By evaluating the information you have compiled so far, you can get a quick preview of your Massachusetts debt consolidation loan payment. To do so, you will divide the total balance of the debt you wish to consolidate by 60. This figure will determine how much your monthly debt consolidation payment would be if you were to pay off the total balance (without interest) over 5 years. Now, compare that number with your disposable income after accounting for your fixed and variable expenses, including any debt payments for accounts you are not consolidating. This calculus will give you an initial idea of whether debt consolidation is an affordable option for you at this time.

Review Your Massachusetts Debt Consolidation Options

If a Massachusetts debt consolidation is something your budget can accommodate, now is a good time to review your Massachusetts debt consolidation loan options. Below is a brief breakdown of some of the pros and cons of each. At the end, you can compare the option of taking out a loan consolidation to the option of entering into a debt management plan.

  • An unsecured personal loan. A good option if you qualify, but read the terms carefully: it may not come with a lower interest rate than you are already paying.

  • A home equity loan. Another good option that usually comes with a low interest rate. But it can be risky, since you are using the equity in your home to guarantee the loan.

  • A mortgage refinance. Also a good option with a low interest rate. But note that refinancing your mortgage will extend the time it takes to pay it off and possibly increase your monthly mortgage payment.

  • Credit card balance transfer. A good but limited option that will usually only consolidate other credit card debt. It is also more risky than the other options as it usually comes with a promotional interest rate that may increase significantly if you are unable to pay off the balance transfer before the promotional period ends.

  • A debt management plan. One of the best options if you have bad credit and cannot get approved for any other debt consolidation loan. However, this option is a long term commitment that must be maintained every month or else you risk making your financial situation worse. 

Apply for a Massachusetts Debt Consolidation Loan

Now that you know how debt consolidation works and you have a strong sense of whether debt consolidation is right for you, it’s important to familiarize yourself with potential red flags you may encounter when selecting a lender for your Massachusetts debt consolidation loan:

  • Never pay any money upfront. Your lender should not ask for any money before they have provided a service.      

  • Be wary of any offers you receive in the mail. Many will advertise “teaser” rates to get you in the door then tell you that you don’t qualify for them after you have applied for your loan.·        

  • If possible, deal with your local bank or credit union. If you have good credit, they can usually offer one or more debt consolidation options.        

  • Never deposit any unsolicited checks you receive in the mail. A lot of scams involve getting you to deposit these false checks and unwittingly disclosing your banking information.

Compare whatever offers you receive to similar results you might be able to achieve through a debt management plan that might lower your interest rate, lower your monthly payment and waive over-the-limit and late fees.

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

You owe it yourself to stay current with your Massachusetts debt consolidation loan after you have finally completed the setup process. Getting behind on a new loan or missing a debt management plan payment can make your financial situation worse than it was before you consolidated. Here are some best practices you can follow to get off to a good start and stay current with all your Massachusetts debt consolidation loan payments:

  • First, keep track of your spending habits to make sure you are staying within your budget. Overspending on recreation or entertainment should never be an excuse for missing a debt consolidation payment.

  • Check your due date. Try to avoid having your debt consolidation payment due on the same date of the month as other large expenses like your rent or car payment. If necessary, speak with your credit counselor about changing the date.

  • Prepare for emergencies. Plan to set aside extra funds from such things as tax refunds, overtime pay or end of the year bonuses for emergencies and unexpected expenses like school tuition or car repairs.

  • Set up automatic payments through your bank or credit union to relieve you of the task of having to set aside and submit your debt consolidation payment every month.

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Massachusetts Debt Management Plan

A Massachusetts debt management plan is a form of debt consolidation that concentrates all your unsecured debt payments into one monthly bill to be paid to a nonprofit credit counseling agency. That agency will then pay your creditors per the terms of your DMP. Nonprofit credit counseling agencies may be able to use their relationships with unsecured creditors to get the interest rate on your consolidated debts lowered, get over-the-limit and late payment fees waived, extend repayment terms, lower your monthly payment and re-age past due accounts. 

Massachusetts Debt Settlement

If you have money to pay your creditors but cannot get approved for a Massachusetts debt consolidation loan, a Massachusetts debt settlement may be a good option for you. Debt settlement works by getting your creditors to agree to settle your debts for less than they are owed, in exchange for a lump-sum payment. You will usually need a for-profit debt settlement company to negotiate with your creditors on your behalf. If successful, you could settle your most delinquent accounts for as little as 50% of what you owe on them. Debt settlement is nonetheless a very risky form of debt relief because you will have to be extremely delinquent on your accounts before most creditors will agree to settle. Additionally, many debt settlement companies will charge you for some of their services whether or not they actually settle any of your accounts.

Massachusetts Bankruptcy

If your credit counselor has told you that you are not a good candidate for Massachusetts debt consolidation, a Massachusetts bankruptcy may be your best alternative. You can file bankruptcy in Massachusetts regardless of your ability to repay your creditors. Bankruptcy legally eliminates your debts when you no longer have the ability to pay them. Moreover, filing for bankruptcy immediately puts an end to harassing calls from creditors and bill collectors. Whether you are looking for a competent bankruptcy attorney to help you file or you would like to file on your own, know that Upsolve can help you meet these needs.

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