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How to Consolidate Your Debts in New York

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In a Nutshell

If you are interested in consolidating your debts, the rest of this article will show you how. We will also discuss alternatives to debt consolidation and help you understand which is right for you.

Written by the Upsolve Team
Updated December 20, 2023

According to the New York State Department of Labor, between October 2018 and October 2019, New York lost 6,600 manufacturing jobs. During the same period, it gained 12,500 jobs in leisure and hospitality. Moving from a high paying manufacturing job to a lower-paying job in hospitality can leave make it hard to pay all the bills you once paid effortlessly. If you have less income than you had before and are struggling to pay the same bills you had a year ago, a New York debt consolidation loan could help you make up the gap.

New York debt consolidation loan works by combining all your monthly debts into one single lower monthly payment to per month. One way of consolidating your debts is to get one loan to pay off all your other debts, then pay off the new loan in a single monthly payment over a fixed period of time. This loan can take many different forms from a personal loan, refinancing your mortgage, a home equity loan, credit card balance transfer, or a debt management plan. The benefits of a New York debt consolidation loan include saving money on high-interest rate credit cards. Avoiding late fees and over-the-limit fees due to missed payments. And charting a clear path to being debt-free – a goal to strive for.

Like any debt relief program, there are some risks with debt consolidation. First and foremost, there is the risk of no actual savings if the interest rate on your consolidated debt is comparable to the rate you have on your current debt. If your financial problems are the result of uncontrolled spending, then there is also the risk of inadvertently getting into more debt by using the credit that becomes available after the consolidation loan is taken out. Despite these risks, if done correctly, a New York debt consolidation loan can put you on the path to finally becoming debt-free!

Learn More Through Free Nonprofit Credit Counseling

An important component of debt consolidation in New York is free, non-profit credit counseling. Debt and budget counseling is a great starting point for anyone feeling a financial pinch. It’s especially beneficial for consumers who struggle to balance their monthly expenses, feel overwhelmed with debt, or worry that they don’t have enough saved. When you take part in free, non-profit credit counseling, you will meet with a trained, certified credit counselor and discuss your current financial situation and your future financial goals. Your counselor will assess your finances with you, including your income, expenses, and debts. Next, they will help you establish financial goals for both the short-term and the long-term; and then use those goals to develop an action plan to achieve those goals. If you agree, they will also pull your credit score and review your credit history with you. You will leave each session with a budget and an action plan. When applicable, counselors will also provide educational materials and referrals to additional resources and services.

Most sessions will last from thirty minutes to one hour and are provided free of charge through a number of nationally accredited nonprofit credit counseling agencies 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 New York

If you are interested in consolidating your debts, the rest of this article will show you how. We will also discuss alternatives to debt consolidation and help you understand which is right for you.

Collect the Details About Your Debts

What type of debt consolidation is best for you depends largely on the specific details of the debts you owe. For instance, the total amount of debt you owe may rule out some debt relief options like credit card balance transfers if you have too much debt to transfer to one credit card. You also need to know other specifics like who your debt is owed to, how much you owe each creditor, your minimum payments due each month, your annual interest rate, over-the-limit, late payment fees and annual fees charged to your account. Be sure to include types of loans you usually cannot consolidate like car loans, medical bills, and student loans. Your credit counselor will need these to help you put together your budget.

You should also locate something detailing the loan terms and conditions that apply to your accounts. If possible, sort your credit card statements and other account histories into specific categories by a creditor, secured and unsecured debts, past due and current accounts, high-interest debt accounts, low-interest rate accounts, government, and student 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.

Determine Your Monthly Income

Whether debt consolidation is a good fit for you will also depend largely on your monthly income. Your monthly income is usually what you bring home from work every month. Because most people get paid bi-weekly as opposed to semi-monthly, it’s important to understand the difference between the two when calculating your monthly income. 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. For purposes of debt consolidation, you should avoid including overtime pay, commissions or bonus pay in your budget. 

Put Together Your Budget

The primary means of determining whether debt consolidation is a viable option for you is your 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 should reflect your total income, less your fixed costs and then your variable costs every month. The amount left over, if any, is your disposable income. Typically, disposable income is what you have available to pay your creditors. If you do not have enough disposable income left over every month to pay all your creditors, then that is a good indication you might benefit from a debt consolidation plan.

One thing that can ruin a budget quickly is non-monthly expenses that only occur intermittently throughout the year. These types of expenses typically include such things as your car registration, oil changes, car repairs, membership or professional dues, and taxes. It is essential to account for these expenses in your monthly budget. And set this money aside each month in your budget to cover these expenses when they become due. These types of expenses should never be a reason to incur new debt or miss a debt consolidation payment.

Do the Math

Before applying for your debt consolidation, it is a good idea to do some basic math to work out what your monthly debt consolidation payment will be and how much disposable income you will have leftover after you make it every month. Take your total debt and divide it by 60 to get an estimate of your monthly debt consolidation payment for a five year period of time. Then take this number and subtract it from your disposable income to see how much you have leftover every month after making your debt consolidation payment. If you need to figure out your total debt and disposable income review the section on putting together your budget.

If your numbers do show that you have sufficient disposable income to take advantage of debt consolidation, there are a few more calculations that might be useful for you. One of these is known as your “credit utilization ratio.” Your credit utilization ratio is a big factor in credit scoring models and significantly impacts your credit score. Knowing that yours is “good” can give you an upper hand when talking to a potential lender. To determine your credit utilization ratio, take your total debt (current balances) divided by your total available credit. Ideally, this number should be below 30%. If it is not, look at some ways to lower your monthly spending. For example, if your variable (or fixed) costs are high (or higher than expected) research alternatives to see if you can increase your chances of a successful consolidation by lowering your monthly expenses.

Review Your New York Debt Consolidation Options

Because every debt consolidation is customized and unique to the individual whose debts are consolidated, you should be familiar with the risks and benefits of each. There is no one size fits all when it comes to debt consolidation. Your income, expenses, credit, and creditors will all play a role in ascertaining the best debt consolidation for you:

  • 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 may 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, personal loans 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 New York Debt Consolidation Loan

You are now ready to apply for your New York debt consolidation loan. You should also have a good idea of what type of loan you are interested in (i.e. personal loan, a home equity line of credit, etc.) and what your monthly payment should be. As you look for lenders, be on the lookout for scams or offers that seem too good to be true. 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 don’t 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 a limited time.

You should be especially careful to never deposit any “checks” you receive unsolicited in the mail as doing so obligates you to all the terms of the loan, including the very fine print. . Other warning signs include deals that sound too good to be true stating you have been “pre-approved” for large loan amounts despite a spotty credit history.

How to Stay Current with Payments After Consolidating Your Debts in New York

Seeing a New York debt consolidation through to success requires a degree of discipline on your part. But there are some commonsense things you can do early on to make it more likely that you will accomplish your financial goals. Making sure the due date for your debt consolidation falls on a time that makes sense - having the payment due at the same time of month as your mortgage or a large student loan payment may not be a good idea; if you notice that your payment due date doesn’t work for you after a few months, see about changing it with the lender. You can also try setting up automatic payments either through your bank or through the lender. This is an excellent way to take advantage of having only one payment to make every month and not having to think about it.

Finally, if a situation does arise that you believe will cause you to miss your debt consolidation payment, contact a credit counselor. They may be able to help you come up with some other way to deal with your unexpected emergency.

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New York Debt Management Plan

A New York debt management plan is a common form of debt consolidation. It is intended to help consumers fully repay their unsecured debt (usually credit cards) by making the repayment terms more affordable. Consumers are able to consolidate multiple monthly debt payments into one single payment, often significantly lowering the interest rates and stabilizing the monthly payment in the process. A debt management plan is helpful for those struggling to balance their regular monthly expenses with unmanageable credit card debt. It’s especially beneficial for consumers who feel overwhelmed with debt, are up to three months behind in their payments, or worry that they may soon fall behind but don’t have good enough credit to qualify for a favorable consolidation loan.

New York Debt settlement

Many individuals who are unable to make a long term commitment to a New York debt consolidation, see New York debt settlement as a good alternative. Debt settlement is not the same as debt consolidation. Debt settlement companies seek to “settle” your debts by convincing your creditors to accept less than they are owed by you. Debt settlement can be risky because there is no guarantee any of your creditors will agree to accept less than they are owed, and many who do, will only do so after you are seriously delinquent on all your debts. You may also be required to leave all your funds in an escrow account controlled by the debt settlement company while you wait.

New York Bankruptcy

Debt consolidation is an ideal remedy for individuals struggling to pay a lot of bills every month with a steady but limited income. However, if you have no income or your debts consist of more than just monthly bills, like charge-offs and court judgments, then a New York bankruptcy may be a better option for you. Bankruptcy legally eliminates current and outstanding debt while providing legal protection from collection activity and court process. If your financial problems are such that debt consolidation is not a viable option for you, then Upsolve can help you learn how to file bankruptcy for free in New York. 

Written By:

The Upsolve Team

Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.

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