As debt grows and grows for many Americans, one way to ease your mind is to find ways to reduce the burden, so we’ve asked Elaine McPartland to share her thoughts on reducing monthly payments on your debt. Elaine is a writer from Consolidated Credit.
Debt payments have a high potential for causing financial problems in your budget. Particularly when it comes to debts that are paid on a revolving payment schedule, such as your credit cards, when the balances get too high, you can struggle to keep up and make ends meet. Eventually your debt payments get to a level where you’re juggling bill payments, putting off important purchases and using quick fix options like payday loans to stay ahead. Unfortunately, this does nothing to help you regain financial stability. To do that, you need to reduce your debt load quickly to cut your debt payments as quickly as possible.
Fortunately, there is a way that you can do both things at the same time. Debt consolidation allows you to combine multiple unsecured debts into a single monthly payment at the lowest interest rate you can qualify to receive. Since the interest rate is so low, you can get out of debt faster even though you pay less money each month, because less of your payment is used to cover accrued interest. The right debt consolidation option can reduce your debt payments by as much as 50% while allowing you to get out of debt in less than five years.
Of course, you need to be able to qualify for the lowest interest rate possible. In most cases, the interest rates need to be 10% or less. The lower the interest rate, the better the terms will be on the debt repayment. Ideally, if you can eliminate the interest completely for at least a limited period of time, you can get out of debt as quickly and efficiently as possible. This usually means that you need to have good credit scores to qualify at the right interest rates.
However, there is one option that allows you to qualify for interest rates that are less than 10% even if you have really bad credit. A debt management program administered through a credit counseling agency will allow you to qualify for the low interest rates you need for debt consolidation even with bad credit. Since the agency works with your creditors and negotiates the interest rates for the program on your behalf, your credit scores are not a factor for qualification. You can use a debt management program successfully and even build better credit by completing the program with on-time payments each month.
Join our newsletter
Subscribe to get the latest "Engineer Your Finances" content via email.