How To Consolidate Your Debts in North Dakota

Collect the Details About Your Debts

In order to determine whether debt consolidation makes sense for you, you will need to collect specific details about your debts. These details are typically provided in your monthly credit card bills or other statements of your accounts. Pay particular attention to things like your current balance, your minimum payment, your current interest rate, annual fees, over-the-limit fees, late fees, and other recurring charges. If possible, divide your bills into categories based on whether it is a “secured debt” or “unsecured debt”. Secured debts are typically secured by your home or car. While unsecured debts typically include credit cards and personal loans. 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 will not be consolidating debts like car loans, student loans and medical bills you should still collect the details on these types of loans as well. Your credit counselor will need them to help you put together your budget.

Determine Your Monthly Income

Once you have collected the details of your debt, your next step should be determining your monthly income. This information will not only be used to create your budget but will help you determine if you are a good candidate for debt consolidation and if so, how to stay current with your debt consolidation. Because the key to debt consolidation is making a set payment every single month without taking out new debt. Commission only or irregular income may make debt consolidation challenging if it’s not clear that you have enough income to pay for living expenses and the monthly payment every month.

To determine your monthly income, you should use your two most recent paycheck stubs. Make sure the paychecks you are using to determine your income is representative of a typical work week. If you base your income on paychecks that include a lot of overtime, your income will be look much higher than it actually is, and you will be setting yourself up for failure by creating a budget you can’t follow.

Put Together Your Budget

All the details we have collected on your debts and the calculations we have carried out to determine your monthly income will all come together in your monthly budget. A budget is a spending plan based on your income and expenses for the month. You will track two types of expenditures with your monthly budget. Fixed costs and variable costs. Fixed costs are those expenses you must pay every month that does not change from month to month. They include rent, mortgage payments, car loans, student loans, and car insurance. In a 50/30/20 budget, you spend about 50% of your monthly income on necessities, 30% on wants and 20% on savings and paying off debt. Variable costs can include your necessities like utility bills, phone bills and transportation.  When putting together a budget you try to allocate an average monthly payment for each of these variable costs to make sure they’re accounted for. You can do this by using your bank statements to review your spending for these items over the last 2-3 months and dividing the total amount by that period of time. This is also the perfect time to identify problem areas of overspending on such things as dining or entertainment.

Do the Math

To get a better picture of what your own debt consolidation might look like, you can do a little math using the information you have already put together. In order to calculate your debt consolidation, you will need some important information from your budget. This includes your total debt, current total monthly debt payments, and disposable income after fixed and variable expenses.

To estimate your debt consolidation monthly payment, take your total debt and divide it by 60. The result is the debt consolidation payment you would have to pay off all your debt in five years without interest. The actual amount will vary based on the interest rate you receive on your debt consolidation and what set-up fees or origination fees  you incur.

Still, you can compare the result with the disposable income that is left after all your other monthly expenses are paid. This should give you an initial idea of whether debt consolidation is possible for you long term. If not, ask your credit counselor about other forms of debt consolidation or alternatives forms  debt relief.

Review Your North Dakota Debt Consolidation Options

Now that you have learned the steps to consolidating your debts in North Dakota, it might be helpful to review the different forms of debt consolidation in detail. No matter which form of debt consolidation you’re leaning toward, there are risks and benefits of each. Some of these risks are common to all forms of debt consolidation, while others are specific to those that involve taking out a new loan and taking on new debt:

• Credit card balance transfers are risky because they offer a lower interest rate on balance transfers for a promotional period of time that is usually shorter than the time you need to pay off the entire balance. If the balance is not paid off within this time, the interest rate usually increases significantly, and you end up paying a higher interest rate than you currently have. Other fees like balance transfer fees can also increase the actual rate of interest you pay on the balance even during the promotional period. 

• Refinancing your mortgage and pulling out extra equity to pay off debt refinances your unsecured debts over the term of the mortgage and may, therefore, be more expensive in the long run. 

• A home equity loan usually comes with an adjustable interest rate, loan origination fees and closing costs that can increase the cost of the loan significantly over the life of the loan. This may result in you having a larger monthly payment than you had before and costing you more in interest and origination fees than you were paying. Even worse, if you default on the loan, you risk losing your home.

• Obtaining an unsecured personal loan usually has fewer risks than the other options as long as you go through a reputable lender. However, they typically come with a higher rate of interest than you are paying on most of your credit card debt. So, choose carefully.

A debt management plan typically does not involve any risk upfront. However, once you enter into the payment plan your unsecured loans will typically be closed as part of the plan. Your credit score will initially be impacted which will limit your ability to obtain new credit. However, a debt management plan is typically the quickest debt consolidation to get started and will provide the most immediate debt relief.

Apply for a North Dakota Debt Consolidation Loan

If you have decided that a North Dakota debt consolidation loan is right for you, all you need to do is apply. But before you wade into the throng of lenders bidding to get your business, here are some things you should look out for:

• First, try to deal with your local bank or credit union first. Your existing relationship with them not only assures that they are reputable, but it may give you better loan terms for your debt consolidation loan, if you are approved.

• Never pay any money upfront; legitimate lending organizations don’t ask for money before they’ve provided any service.

• Carefully scrutinize any offer you receive in the mail; is it advertising a promotional rate or are the terms only available to “well qualified” applicants;

• And never deposit any “checks” you receive unsolicited in the mail!  Doing so provides the lender with all of your pertinent banking information and often obligates you to extremely onerous repayment terms hidden in the very fine print.

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

Finally, if you are rejected by your local bank or credit union and have to deal with a lender you are unfamiliar with, 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 North Dakota Attorney General’s office. Finally, look up online reviews. 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.

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

One area you should not neglect after consolidating your debts in North Dakota is staying current with your loan payments. The more payments you make on-time at the start of your debt consolidation, the more likely you are to pay off your debt successfully. Taking a little time now to think about ways to stay current with your debt consolidation payment is a good way to spot potential difficulties. Some things to consider include:

• What date will your payments be due? Try to avoid making the due date for your debt consolidation payment on the same day of the month as another large expense like your car note, or mortgage.

• Pay extra when you can? Making extra payments when you can is an excellent way to not only stay current with your debt consolidation payment but to pay off your debts early.

• Set aside extra funds for emergencies? Using extra money from overtime, end of the year bonuses or tax refunds to set up an emergency fund to cover unexpected expenses is a great way to make sure you stay current even when financial emergencies arise.

• Reward yourself? Don’t wait until all your debt is paid off to reward yourself for honoring your commitment to yourself to become debt-free. Celebrate small milestones in small ways that make you feel good about yourself.