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How to Consolidate Your Debts in North Carolina

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In a Nutshell

If you’re interested in learning more about the North Carolina debt consolidation process, read on. The sections that follow will detail the documents you’ll need, the information you should pull out of those documentsm and what to do when you are ready to apply for a debt consolidation loan.

Written by Upsolve Team
Updated January 28, 2020

If you are committed to paying down your debt and are frustrated over not being able to make significant headway towards that end goal, then the North Carolina debt consolidation process may serve as a valuable tool as you work towards becoming debt-free.

Debt consolidation combines your high-interest unsecured debt into one single monthly payment. This single payment will generally allow you to reduce the amount of time it will take you to pay off your debt and will allow you to avoid missing payments that can result in substantial over-the-limit and late fees. Debt consolidation can be accomplished with or without a loan. If you choose to take out a new loan to accomplish debt consolidation, there are several options available to you. These options include securing an unsecured personal loan, a credit card balance transfer, a home equity loan or refinancing your mortgage. If you choose to pursue debt consolidation without taking out a new loan, you can accomplish this through a North Carolina debt management plan. A debt management plan combines your unsecured credit card debt into one single monthly payment. You make this payment to an agency every month that then distributes the proceeds to your creditors per the terms of the debt management plan.

Each form of debt consolidation has its benefits and disadvantages. It is important to do some research before determining which is the best approach for your unique situation.

Learn More Through Free Nonprofit Credit Counseling

Because North Carolina debt consolidation is not a one size fits all solution to every individual’s financial problems, it is important that you obtain free credit counseling from an accredited, non-profit credit counseling agency before committing to the debt consolidation process. When you attend a free non-profit credit counseling session, you will meet with a certified credit counselor to discuss your current financial situation and your future financial goals.

Your counselor will assess your finances with you, including your income, expenses, and debts. They will also help you establish financial goals for both the short-term and the long-term, and will help you develop an action plan to achieve those goals. If you’d like, they will also review your credit history with you. You will leave your session with a better idea of whether or not debt consolidation is right for you and your financial situation. When applicable, counselors will also provide educational materials and referrals to additional resources and services.

Your credit counseling session will last from thirty minutes to one hour and will be provided free of charge through a number of nationally accredited nonprofit credit counseling agencies such as Money Management International, CESI and 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 North Carolina

If you’re interested in learning more about the North Carolina debt consolidation process, read on. The sections that follow will detail the documents you’ll need, the information you should pull out of those documentation and what to do when you are ready to apply for a debt consolidation loan.

Collect the Details About Your Debts 

You should begin your assessment of whether debt consolidation is right for you by collecting the details of the debts you would like to consolidate and any additional debts you owe. This information will also help you with the budgeting process you’ll tackle after you assess your monthly income. Start with your credit card statements. These statements should detail your current balance, minimum monthly payment, due dates, annual interest rate, late fees, over-the-limit fees and other charges billed to your account. Even if you will not be consolidating debts like car loans, student loans, and medical bills, you should still collect similar details on these types of loans as well. Getting a free credit report will serve as a safeguard to make sure that no account falls through the cracks when you put together your consolidation plan. You can obtain your free annual credit report once per year from all three of the major credit reporting companies.

Determine Your Monthly Income

After you have the details of each of your debts, the next thing you should do is determine your monthly income. A regular monthly income is essential to successful debt consolidation, as failing to pay your debt consolidation plan on time will lead to additional financial difficulty. To determine your monthly income, take your two most recent pay stubs and record your regular pay. Do not include overtime, bonus pay or holiday pay. You’ll only want to record income that you reliably receive every month. If your two most recent pay stubs are not representative of what you usually get paid, then use the last two pay stubs that are. You should also verify the frequency with which you get paid. Meaning if you get paid twice a month, is it bi-weekly or semi-monthly. Bi-weekly pay occurs more often during the year but with less pay per check. Semi-monthly pay occurs only 24 times per year but with more pay per check.

Put Together Your Budget

Working out your monthly income will allow you to put together a monthly budget. A budget serves as a snapshot of your monthly income and your monthly expenses. You’ll use your budget to schedule and track monthly expenses and ensure that your expenses do not exceed your income. Begin the budgeting process by separating your expenses into “fixed costs” and “variable costs.” Fixed costs are generally those items you must pay that do not fluctuate more than $10 from month to month like your rent, auto loan, car insurance, and student loans. Variable costs are expenses that vary from month to month like gas, utilities, and groceries. Knowing which expenses are variable will force you to identify how much you need to realistically budget for each variable expense on a monthly basis. When you subtract your expenses from your income, the result is your disposable income. Ideally, this is what you have available to pay your debt and to set up an emergency fund.

Do the Math

Now you will do some basic math to get a preview of what your North Carolina debt consolidation might look like. Start by taking your total debt (of the accounts you hope to consolidate) and divide that figure by the number of months you will take to pay off that debt. For example, if you would like to pay off your debt within five years, you’ll divide your total debt by 60 months. The result is an approximation of what your monthly debt consolidation payment would be. Next, compare this result to your disposable income. As long as your disposable income exceeds your monthly debt payment, then debt consolidation would probably be a good fit for you. When “doing the math,” don’t forget to factor in any debt payments you’ll need to make on debts you’re not planning to consolidate, otherwise this omission will throw your numbers out of whack. 

Review Your North Carolina Debt Consolidation Options

Now that you have all the personal financial information you need to determine whether debt consolidation is a good option for you, it is time to review your debt consolidation options: 

  • Credit card balance transfer. This option is good if you are only consolidating credit card debt and you have small balances that you expect to pay off soon. It will not be a good option if you have other debt and large balances, as the promotional interest rate usually given will increase significantly at the end of the promotional period.·        

  • Refinance your mortgage. This is a good option if you have equity in your home and don’t mind using it to pay off unsecured debts. However, taking the equity out will increase the balance owed on your mortgage and the time it will take to pay if off.·        

  • A home equity loan. Another good option if you have equity in your home. You can use the loan to pay off unsecured as well as secured debts. But unlike refinancing, you will incur a new loan payment secured by your home. Meaning, if you default on the loan you risk losing your home.     

  • An unsecured personal loan. Another great option that can pay off secured and unsecured debt. This is a viable choice if you have good credit. However, this kind of loan may not come with a lower interest rate than what you are currently paying on your credit cards and other unsecured debt. 

  • A debt management plan. This is a great option if you have poor credit but a regular monthly income. A DMP allows you to make a single monthly payment to an agency that will distribute it to your creditors. 

Apply for a North Carolina Debt Consolidation Loan

Because they are not banks, non-profit credit counseling agencies cannot provide funding for a North Carolina debt consolidation loan. This means you will have to select an alternative lender that you will deal with on your own. Here are a few best practices you can follow to narrow down your choices:

  • If the deal sounds too good to be true; it probably is. This may be a cliché but first and foremost be leery of lenders who promise you terms and conditions you know to be unrealistic.

  • Avoid pushy or aggressive lenders. Never let a lender pressure you into a loan before you are ready. Reputable lenders will make sure you have all the information you need to make an informed decision.

  • Be leery of direct mail offers and online banner ads. Direct mail offers and online banner ads often conceal terms and conditions that contradict their advertisements.

  • Take advantage of your relationship with your local bank or credit union. If you have good or decent credit, approach your local bank or credit union about their debt consolidation loan options.

  • Remember to compare the terms and conditions of your loan to those of a customized debt management plan. A debt management plan can often yield similar results to a debt consolidation loan without requiring you to take out a new loan. You can also opt for this approach irrespective 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 North Carolina Attorney General.

How to Stay Current with Payments After Consolidating Your Debts in North Carolina 

There are a few things you can do now to put yourself in a position to stay current with your North Carolina debt consolidation loan well into the future. Consider the following questions and tips moving forward:

  • What day of the month will your debt consolidation payment be due? A good rule of thumb is to avoid the first or last day of the month when other large bills are due.

  • Can you make extra payments? When you first secure your debt consolidation loan, you may be pleased to discover that you’ve saved a little extra income every month by lowering your individual payment amounts. Use that income to pay extra on your debt consolidation loan or debt management plan if you can. This will not only help you stay current but will help you pay off your debts sooner.

  • Start an emergency fund. Another thing you can do with that extra income is to start an emergency fund. An emergency fund ensures you will not need to miss your debt consolidation payment to cover unexpected expenses or emergencies.

  • Enroll in bill pay. Many banks and credit unions offer automatic bill payment services. Enrolling in one to pay your debt consolidation loan is an excellent way to ensure it gets paid, whether you remember to pay it or not.

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North Carolina Debt Management Plan

A North Carolina debt management plan is a form of debt consolidation designed to help you get out of debt without having to take out a new loan. You can take advantage of this option regardless of your current credit score. Working with an accredited, non-profit credit counseling agency, you will put together a debt management plan tailored to your current financial situation and structured to pay off your debt. Most credit counseling agencies are also able to get your creditors to agree to a lower interest rate than you are currently paying on your eligible accounts and to waive over-the-limit and late payment fees.

North Carolina Debt Settlement

North Carolina debt settlement is a form of debt relief that requires getting your creditors to agree to accept less than they are owed to settle your accounts. Typically this process not only requires that you have a lump sum of funds available to pay to your creditors who agree to settle, but it also depends on turning those funds over to a for-profit debt settlement company to negotiate on your behalf. Non-profit credit counseling agencies cannot represent you during the debt settlement process and many for-profit debt settlement companies promise results that they cannot deliver. Therefore, if you’re interested in this option, it’s important to approach it with caution.

North Carolina Bankruptcy

Debt consolidation is not a one size fits all solution to every financial problem. If you are out of work, have no income or simply have too much debt for debt consolidation to serve as a good option for your situation, then a North Carolina bankruptcy may be a good debt relief alternative for you and your family. Bankruptcy allows you to eliminate eligible debts, usually after restructuring them and paying them back over a 3-5 year period. Filing for bankruptcy is not without its potentially challenging consequences but this process can also help you to achieve a fresh start. If you feel you a North Carolina bankruptcy is your best option, Upsolve can help you get started. 

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