How to Consolidate Your Debts in Michigan

Collect the Details About Your Debts 

Begin your Michigan debt consolidation process by collecting information about the debts you would like to consolidate. This will usually consist of your most recent credit card statements and the monthly bills for your other debts such as medical bills and other unsecured debt. Pay particular attention to the total amount owed, the due date, current balance, minimum payment, and interest rate. Also, consider obtaining a copy of your free annual credit report to make sure you do not miss any outstanding accounts during your information-gathering process. Once you know “what” you owe, you can determine which accounts you’d like to consolidate. 

Determine Your Monthly Income

For the purposes of determining whether debt consolidation is a sustainable option for you, you should avoid including overtime pay and “special pay” when calculating your monthly income. Successful debt consolidation is dependent upon a debtor’s ability to make monthly debt consolidation payments every month reliably over an extended period of time. Including overtime and irregular income in your monthly income calculations may artificially inflate how much money you have available every month to pay your bills. When calculating your income, you should ideally reference your two most recent pay stubs, provided they are representative of a typical work week. 

Put Together Your Budget

You can now use your monthly income to put together a budget. An accurate budget is a mainstay of good money management. A budget serves as a screenshot of the income you have coming in every month and the expenses you have going out. A budget typically categorizes expenses as “fixed costs” or “variable costs.” Fixed costs are expenses that largely remain the same such as rent, mortgage, car loans, student loans, and insurance. Variable costs are expenses that fluctuate from month to month and can include groceries, gas, utilities, recreation, entertainment, and charitable donations. To create your budget, you should list all of your regular income and all your expenses and subtract your total expenses from your total income. (At this point, DON’T include monthly payments on any accounts you hope to consolidate.) The resulting calculation is your disposable income. If you have trouble putting together your budget on your own, there are several online apps that will help you set one up like Mint and Albert. Your bank or credit union may also offer online tools to help you with budgeting.

Do the Math

After doing a little math, you’ll be able to approach lenders about funding your Michigan debt consolidation loan with the confidence that you are a good candidate for the loan you are seeking. Alternatively, you’ll be able to work with a credit counseling agency to set up a debt management plan for success once you better understand how much money you have available for your monthly payments. You’ll want to calculate your approximate monthly Michigan debt consolidation loan payment to get a better sense of whether you can make your payments regularly and without hardship. To do this, take your total debt (of the accounts you hope to consolidate) and divide it by 60. The result is how much the monthly payment would be if you were to pay off the total balance (without interest) over five years. 

Review Your Michigan Debt Consolidation Options

Now is a good time to review the pros and cons of each type of debt consolidation loan that may be available to you and how they compare to a customized debt management plan:

• A good option to start with, if it is available to you, is an unsecured personal loan. A personal loan allows you to consolidate any debts you have. The disadvantage is that it may be difficult to obtain with poor credit or it may come with a high-interest rate.

• Another good option is a credit card balance transfer. A credit card balance transfer allows you to consolidate other credit cards without having to close any of them. The disadvantage is that it can only consolidate credit card debt and the interest rate can rise significantly if you are unable to pay the balance off prior to the promotional period expiring.

• Refinancing your home mortgage or securing a home equity loan are also good options. Both have historically low-interest rates and allow you to pay off whatever debts you want. But both usually require good credit, can take a long time to complete and may jeopardize your home in the event of default.

• A Michigan debt management plan is a good option if you have poor credit, need debt relief relatively quickly and have reliable, regular monthly income. A debt management plan gives you the convenience of one single monthly payment. This payment is paid to a non-profit agency that distributes it to your creditors and negotiates with them to (ideally) lower your interest rate and waiver over-the-limit and late fees.

Apply for a Michigan Debt Consolidation Loan

Obviously, choosing a lender to fund your Michigan debt consolidation loan is an important step in consolidating your debts. The best lender for your Michigan debt consolidation loan will depend largely on the type of debt consolidation you choose to pursue. There are some common-sense precautions you can take, when selecting a lender, to make sure you are not taken advantage of by scammers and unscrupulous enterprises:

• Avoiding or carefully screening direct mail and online offers is a sensible precaution you can take to reduce your chances of being ripped off or taken advantage of.

• Another reasonable precaution you can take is to never cash or deposit unsolicited checks you receive in the mail. Doing so could disclose your personal banking information to fraudsters.

• Another good rule of thumb when dealing with unknown lenders is to never pay money upfront. Your lender should not demand money from you before they have provided any service.

• A final precaution you take to not only avoid being ripped off or taken advantage of but to make sure you have exhausted all your options is to compare whatever offers you receive to similar results you might be able to achieve through a debt management plan. You should never settle for a loan you are not happy with because you have bad credit or do not earn enough to qualify for better terms. A debt management plan is tailored to your specific financial situation and is available regardless of your credit score.

Finally, if you feel you are being taken advantage of or have been pressured into an arrangement against your will, report your dealings with that lender to the Michigan Attorney General.

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

Once you have been approved for the Michigan debt consolidation loan of your choice, it is imperative that you stay current with your Michigan debt consolidation loan payments. Here are some things you can do at the start of your Michigan debt consolidation process to make it more likely you will stay current with your payments:

• Ask your lender to fund your debt consolidation loan so that your due date does not fall on the same date as other large monthly expenses.

• Ask your bank or credit union to set up your debt consolidation loan as an automatic monthly bill payment.

• Set up an emergency fund to cover unexpected large one-times expenses (taxes, tuition, repairs).

• Pay extra when you can and pay early if possible.

• Review your monthly statements and keep track of the payments you have made, the payments you have remaining and the interest, fees, and costs you have been charged. If anything looks out of place, talk to your lender or credit counselor.