How to Consolidate Your Debts in Maine

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Written by the Upsolve Team.  
Updated December 16, 2019

Summary

Now that you are ready to explore debt consolidation as an option for you and your family, the rest of this guide will give you step-by-step information on getting started. We will begin by going over the information and documents you should get together beforehand. Next, we will show you how to use that information to determine if you are a good candidate for debt consolidation and finally we will show you where you can go to get help putting together the debt consolidation program that is best for you.

According to a recent survey by the Student Loan Hero, 48% of people with over $6,000 in debt have never taken advantage of debt consolidation. Whether it is because they do not feel their credit score is high enough, they are worried they will be scammed, or they simply feel like it would be too much work, all of them are neglecting a worthwhile debt relief option that could help them become debt-free quickly and easily with very little costs and little impact on their credit score.

Debt consolidation involves combining all of your higher-interest debt into one single payment. Debt consolidation can include such things as credit card debt, medical bills, furniture or appliance loans, and personal loans. One way of consolidating your debts is to get one loan to pay off all your other debts, then pay off that loan in a single monthly payment over a fixed period of time. This loan can take many different forms –a personal loan, a home equity loan, a credit card balance transfer, refinancing your mortgage to pull out equity, or through a debt management plan. 

The biggest benefit of a Maine debt consolidation loan is that it saves you money on high-interest loans. This is because most debt consolidation loans give you a lower interest rate than you had before on personal loans or credit card debt. Debt consolidation also gives you the convenience of having only one payment per month to cover everything you owe. Finally, debt consolidation puts you on a clear path to being debt-free, a goal to strive for

Learn More Through Free Nonprofit Credit Counseling 

Whether you are no longer able to pay your bills and seeking long term debt relief or simply anxious to get out of debt, anyone who wants to know their options on how to deal with that debt can benefit from free non-profit credit counseling

The first step to starting any debt consolidation program is to seek free non-profit credit counseling. In fact, unless you are planning on taking out a new loan to consolidate your debts, a credit counseling agency can assist you in setting up a consolidation by way of a debt management plan. This is especially true since the initial credit counseling session is provided free of charge through a number of accredited nonprofit credit counseling agencies such as Money Management International,CESI orGreen Path

For help finding an accredited non-profit credit counseling agency in your area, feel free to contact Upsolve.

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How to Consolidate Your Debts in Maine

Now that you are ready to explore debt consolidation as an option for you and your family, the rest of this guide will give you step-by-step information on getting started. We will begin by going over the information and documents you should get together beforehand. Next, we will show you how to use that information to determine if you are a good candidate for debt consolidation and finally we will show you where you can go to get help putting together the debt consolidation program that is best for you.


Collect the Details About Your Debts

By far the most important information you will need for your debt consolidation is the total amount of debt you have that needs to be consolidated. Try to get as accurate a total as you can. The best way to do this is by gathering all of your monthly bills and your most recent credit card statements that show what your monthly payments and current balances are on those accounts. However, you should also include statements and invoices for personal loans, student loans, medical bills, payday loans, auto loans, installment loans, collection notices and layaway accounts. If you can’t locate your actual bills, pull a copy of your free annual credit report which will include most of this information.

Even if you are not sure whether you can consolidate your debt, it’s important to know the total amount of debt you owe and how much you pay on it each month to accurately determine if a debt consolidation loan makes sense for you. The most important information you need from these bills, invoices and statements is your current balance. However, you should also pay particular attention to due dates, interest rates, monthly payments, late fees, and annual fees. 

Determine Your Monthly Income

Once you have determined how much you owe and how much you pay on your total debt each month, it is just as important to determine the monthly income you have every month to pay that debt with. In order to benefit from debt consolidation, you must have sufficient monthly income to make the consolidated loan payment, even if you don’t have enough income to pay your current bills.

The most reliable means of determining your monthly income is by using your monthly paycheck stubs. Ideally, you should use the two most recent paystubs provided they are representative of a typical work week. If you work a lot of overtime at certain times during the year and include this in your monthly income you may be artificially inflating how much money you have available every month to pay your bills. And setting yourself up for failure. 

Another consideration in determining your total monthly income is how often you get paid. If you are paid bi-weekly, your monthly income is not simply your paycheck multiplied by two every month. Bi-weekly income occurs every two weeks, 26 times per year and generally includes 80 hours. Semi-monthly income, on the other hand, occurs twice per month, 24 times per year and generally includes 88.67 hours each pay period. As a result, if you get paid bi-weekly you receive two more checks per year than someone who gets paid semi-monthly. But your checks are about ten percent smaller each pay period. You can find out your pay frequency on your monthly pay stub.

Put Together Your Budget

One of the first things a reputable credit counselor will go over with you is putting together a monthly budget. A monthly budget compares the money you have coming in each month, with the money going out for fixed and variable costs and how much is left over. It is intended to be a snapshot of your spending habits. And to show you where red flags appear.

Your budget will consist of two expenditures: fixed costs and variable costs. Fixed costs are bills that don’t fluctuate more than $10 each month. Such as your rent/mortgage, cell phone, internet, cable, car note, and car insurance. Variable costs are monthly expenses that fluctuate every month. Such as utility bills, groceries, gas, and entertainment. Because you do not know what these will be each month you can get an average of how much you spend on your monthly variable costs by reviewing your spending over the last two to three months. Take the total for each expense and divide it by three to get an average. This is also the perfect time to identify problem areas of spending on such things as fast food, entertainment or even utilities.

Do the Math

Now that you have put together a complete picture of your current financial situation, we will use it to see if debt consolidation is still a good option for you. We will start by revisiting a few concepts from the previous sections. The first of these is your total debt, current total monthly debt payments, and disposable income.

Using the information we gathered previously, we can get a rough idea of what your monthly payment would be if you consolidated your debt and whether you could afford to make that payment. To do this we will take your total debt and divide it by 60. This will tell us how much you would have to pay each month on that debt to pay it off in five years. For example, if your total debt was $60,000. Your monthly debt consolidation payment (without accounting for interest) would be approximately $1,000 per month. If we compare that amount to your disposable income, you would have to have at least $1,000 per month left over after paying your living expenses to benefit from debt consolidation. If you have less than this amount, then you’re probably not a good candidate for debt consolidation and should look into some of the other debt-relief options we mention at the end of this article.

Review Your Maine Debt Consolidation Options

Now that we have covered the specifics of debt consolidation and whether it’s a good option for you. Let’s take a moment to review all of your Maine debt consolidation options.

We mentioned at the start of this article that debt consolidation can occur in many different forms. Credit card balance transfers, unsecured debt consolidation loans, home equity loans, and debt management plans. Understanding a little about the pros and cons of each can help you decide which is best for you:

  • Credit card balance transfers involve using one credit card to pay off the balance owed on one or more of your other credit cards. Often at a lower rate. But they also typically include balance transfer fees and are tied to short term promotional interest rates that increase significantly if the balance is not paid in full by that time.

  • Debt consolidation loans involve taking out one large new loan to pay off all your debt. These loans are great, but you usually have to have good credit to obtain one. There is also the risk after obtaining the loan of running up the balances on your old cards again, leaving you worse off than before.

  • A home equity loan involves opening a line of credit secured by your home to pay off all your outstanding debt. They also usually include closing costs and origination fees and you risk losing your home if you default on the loan.

  • A debt management plan involves working with a credit counseling agency to consolidate all of your loan payments into one monthly payment that pays off the entire debt over the life of the payment plan

Apply for a Maine Debt Consolidation Loan

You are now ready to apply for your Maine debt consolidation loan. Hopefully, you also now have a good idea of what type of loan is best for you. In looking for that loan or plan you should also be aware, however, of what kind of lenders/loans to avoid.

While there are exceptions, as a general rule, you should always be leery of any offers, checks or promotions you receive through the mail from organizations you do not already have a financial relationship with. Or lenders or debt settlement companies who use very aggressive sales tactics warning that their offers are only good for an extremely limited time. 

Once you have narrowed your choice of lenders, you can do some independent research to ensure the lender you are dealing with is trustworthy. This includes checking their rating with your local and national Better Business Bureau. Also, check to see if they have received any complaints through the Maine Attorney General’s Office. Finally, look up an online review. Just be careful if the reviews look suspicious such as being posted to the same site or on the same day. Or on different sites by the same individuals.

For help finding an accredited non-profit credit counseling agency in your area feel free to contact Upsolve.

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

Regardless of what type of debt consolidation you go with. The true power of any debt consolidation plan is making your required monthly payment every month without fail. Even missing one payment during the plan can make it extremely difficult to get back on track and complete it successfully. For that reason, it is important to start thinking now about ways to stay current with your payments after consolidating your debts in Maine.

Making sure the due date for your debt consolidation payment falls on a day during the month that makes sense is an early way of being proactive about making sure your payments are made. Having the payment due the same time of the month as your mortgage may not be a good idea. If you do notice that your payment due date doesn’t work for you after a few months, see about changing it with the lender. 

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Maine Debt Management Plan

Because “debt consolidation” is a general term that includes Maine debt management plans, it’s important to remember that unlike “debt settlement”, a debt management plan is intended to help you fully repay your unsecured debt by making the repayment more affordable. When set-up through an accredited credit counseling agency, they can often get your creditors to waive over-the-limit and late fees and reduce the overall rate of interest. It also allows you to consolidate multiple monthly debt payments into one, often significantly lowering the interest rates and stabilizing your monthly payment in the process. Because there are no credit score requirements, a debt management plan is a great alternative if you are unable to secure a Maine debt consolidation loan or credit card balance transfer due to poor credit history.

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Maine Debt Settlement

While a debt management plan is full repayment of existing debt at better loan terms, without a new loan or reduction in total amount owed, debt settlement is a partial repayment, often with the help of a third-party debt settlement company. Maine debt settlement often makes the most sense when you have money available to make lump-sum payments to your creditors and you have a manageable number of creditors to negotiate with. Because you are not repaying the debt in full, this often means that setting your debts only makes sense if your credit score has already been damaged or is already low. 

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Maine Bankruptcy

Despite all of the benefits of debt consolidation, if you have done the math we went over previously, and simply do not have the disposable income to pay your bills any longer or even meet your day to day living expenses, then a Maine bankruptcy may be the best alternative for you. Upsolve was created to help individuals who could no longer afford to pay their bills, get a fresh start through Chapter 7 bankruptcy.

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The Upsolve Team
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