Debt Consolidation

Debt consolidation offers debt relief by consolidating your monthly debt payments into one affordable payment. Debt consolidation programs are offered by debt consolidation companies and by nonprofit credit counseling agencies.

Debt Consolidation and Credit Consolidation Programs

What is Debt Consolidation?

Debt Consolidation without a loan is an innovative solution by InCharge Debt Solutions.  We take the work out of debt management by combining your payments into a single, predictable monthly payment. You choose the day of the month that works best for you, based on your personal budget and payroll schedule. This is just one of the benefits available to those who qualify for our debt management program. Other benefits may include lower interest rates from your creditors, waived fees, stopping the collection calls and paying off your debt faster than on your own.

Here are five reasons you should consider InCharge debt consolidation:

  1. Convenience: Paying multiple debt payments is hard work. Mail gets lost, life gets busy and the late fees pile up. With InCharge’s debt management plan, we make it easy. We consolidate debt into one payment.
  2. Scheduling: Ever feel like you are juggling too many payments with too many due dates? With InCharge’s debt management plan, you can schedule the exact day of the month that your single debit pays all of your debts. This means no more confusion over what needs to be paid when: your debts are all paid with one payment.
  3. Lower Interest Rates: If you qualify for our debt management program, we may be able to secure lower interest rates from your creditors.
  4. Pay Off Your Debt Faster: How would you like to be debt free within a few years? Each year, thousands of InCharge clients graduate to debt free status.
  5. Stay Debt Free Education: We can help you become debt free, but how do you stay that way? As an InCharge client, we’ll help teach, motivate and inspire you to stay debt free. Our financial literacy program will teach you how to save money, build an emergency fund and set achievable financial goals.

How the Debt Consolidation Alternative Can Help You

According to data from the Federal Reserve, approximately 37% of Americans carry a credit card debt balance from month to month. Some people carry small balances. Others carry large balances. You may be somewhere in the middle. Carrying a balance over months, years, decades… adds up. The average credit card interest rate is around 15% APR. That’s $15.00 per year for every $100 you carry in debt. If you have $15,000 in debt, you’d be paying $2250 each year to hold that debt. And that’s only for one year. If you carry that same debt for 5 years, you’ve paid $11,250 to borrow $15,000.

It’s not easy to get out of debt. That’s where debt consolidation comes in. Here’s a scenario to help you better understand traditional debt consolidation. After you’ve read that, we’ll tell you how InCharge’s non profit debt consolidation alternative can capture all the benefits of traditional debt consolidation without the risks.

Consolidating Debt and Loans with a High Debt-to-Income Ratio

Anne, 32, was a high school teacher in debt. Anne starting using credit in college to pay for books and expenses. She graduated with a small balance on two cards: $2400. As a new teacher, Anne signed up for 2 more credit cards at her favorite clothing stores to pay for a professional wardrobe, accumulating $2500 more in debt. Over the next few years, Anne experienced a number of financial set-backs. She opened another credit card to help pay for a major car repair ($1500) and another to cover expenses when her roommate moved out with no notice ($2500).

Two years ago, Anne was laid off. As a teacher, she thought she had job security, but her state had a budget crisis and teachers with little seniority were the first to go. She was unemployed for one year and then re-hired the following year. With few options, Anne lived off her credit cards while unemployed, adding an additional $9000 to her debt. At 32, she owes $17,900 on 9 different credit cards. In some 2-week spans, Anne has to make 5 credit card payments. “It feels like a big payment is always due. I try not to look at the finance charges. It’s just too depressing. I can barely keep up.”

Anne is interested in consolidating debts. “Just having one payment to worry about each month would be a godsend.” When she looked into a traditional debt consolidation program, Anne faced a number of problems. Because be she had a very high debt-to-income ratio, she did not qualify for the the best interest rates. There were also high fees associated with taking out a large loan. Then Anne discovered InCharge’s debt consolidation alternative.

With InCharge’s debt consolidation alternative, Anne was able to consolidate all of her payments into one convenient monthly payment, without taking out a new loan. InCharge was also able to help Anne get lower interest rates on 7 of her 9 cards, meaning more of her payment each month would go to pay off the balance, than to interest. With the InCharge debt consolidation alternative, Anne will be debt free in 4 years and 2 months. “Having lived with credit card debt my entire adult life, I cannot tell you what it means to me to be debt free in a few years. Every time I make my one consolidated payment, I know I’m one month closer to my financial freedom.”

Debt consolidation lenders won’t qualify you for a loan if too much of your monthly income is dedicated to debt payments. If you find your debt-to-income ratio in excess of 50 percent, you should consider alternatives to debt consolidation, including consolidating without a loan. If you need help calculating your ratio, check out our article on how to calculate your debt-to-income ratio.

Debt Consolidation Calculator

Use this debt consolidation calculator to figure out what your monthly payment would be with a debt consolidation loan. Enter your current balances, monthly payments and interest rates under Current Debt Information. Enter the proposed interest rate and repayment period under under Consolidated Loan Information. Push submit. The results will show you your current combined monthly payment as well as the predicted monthly payment under a debt consolidation loan.


How to Get a Consolidation Loan

A debt consolidation loan can take a lot of the stress out of your financial life by reducing multiple monthly payments to just one payment to a single source.

However, he whole purpose of doing this is to reduce the interest rate you pay on debts as well as the amount you pay every month so it is important that have accurate financial records.

Here is a step-by-step sequence for getting a debt consolidation loan:

  1. Make a list of the debts you want to consolidate.
  2. Next to each debt, list the total amount owed, the monthly payment due and the interest rate paid.
  3. Add the total amount owed on all debts and put that in one column. Now you know how much you need to borrow with a debt consolidation loan.
  4. Add the monthly payments you currently make for each debt and put that number in another column. That gives you a comparison number for your debt consolidation loan.
  5. The next step is to approach a bank, credit union or online lending source and ask for a debt consolidation loan (sometimes referred to as a personal loan) that covers the total amount owed. Ask how much the monthly payment will be and what interest rate charges are.
  6. Finally, do a comparison between what you currently pay each month and what you would pay with a debt consolidation loan.

Your new monthly payment and interest rate should be lower than the total you were paying. If not, try negotiating with your lender to lower both rates. If you’ve been a good customer at that bank or credit union, they may take that into consideration and reduce your rates.

If you still can’t get a lower monthly payment and interest rate than you were paying, call a nonprofit credit counseling agency and investigate another debt-relief option like a debt management program or debt settlement.

Debt Consolidating Loan vs. the InCharge Debt Consolidating Alternative

Debt Consolidation Loan

  1. Take out a new debt consolidation loan
  2. Pay high loan origination costs
  3. May be turned down if your credit score is low
  4. Consolidation interest rates may be high
  5. One consolidated monthly payment
  6. New large loan pays off several smaller loans
  7. May not qualify because of high debt-to-income ratio

InCharge Debt Consolidation Alternative

  1. No new debt consolidation loan
  2. InCharge helps you secure lower interest rates with your creditors
  3. One monthly payment to InCharge (InCharge divides it up among your creditors)
  4. No hefty loan origination fees (because there is no new loan)
  5. Interest rates will be lower, in most cases
  6. Access to free debt counselors and support, helping you stay the course to become debt free
  7. Access to exclusive educational material
  8. Referrals to other nonprofit companies that can help you with other problems

How to Consolidate Bills?

Some people refer to debt consolidation as bill consolidation because consolidating your credit card debt has the effect of consolidating your bills into one. So, how do you consolidate your bills? By calling a nonprofit credit counseling agency like InCharge, you can reap the benefits without taking on a new loan, including: not having to make individual credit card payments, less risk of missing a payment or paying late, fewer late fees, the ability to access lower interest rates for many of your credit cards. This enables you to pay off your debt faster because more of your payment each month will be applied to the balance versus the interest.

Signs You Should Consolidate Debt and Loans

Here are some signs that consolidating loans might be a good idea for you:

  • You are spending more money than you are making.
  • Your credit card balances are growing, not shrinking.
  • The interest payments on your credit card debt is exceeding the amount purchased each month.
  • You’re paying only the minimum payments on your debt, and even that is difficult.
  • You have been turned down for a credit card or store installment loan for having a high debt-to-income ratio.
  • You carry debt on more than 5 credit cards.
  • You are approaching or are at your credit card limits.
  • When bills come in the mail (or email) you dread opening them.
  • You carry a balance on credit cards with interest rates in excess of 18.99%.
  • Your credit score is falling.

How To Prepare To Speak With A Debt Consolidator

Before reaching out to a debt consolidation company, take some time to go through the following debt consolidation checklist:

  1. Figure out your total credit card debt: that’s all of your balances added together
  2. Calculate the average interest rate you are currently paying for your debt. Try to find a debt consolidator who will offer you an interest rate that is at least 3 to 5 percent lower.
  3. Add up how much credit card interest you paid last month.
  4. Add up the total of your current minimum payments. If you can’t afford your current minimums, and a debt consolidator gives you an estimated consolidated monthly payment that is equal to or greater than your current minimums, you can’t afford that either.

Credit Consolidation Options

Consolidating your credit card debt can help you pay it off faster, but choosing a credit consolidation company can be difficult. There are a number of places you can go, from online lenders like Lending Club, to debt settlement firms like National Debt Relief and Oak View Law Group. Learn about the pros and cons of various credit consolidation options. Learn about the best ways to consolidate your debt.

How do I Consolidate My Debt?

One way to accomplish debt consolidation on your own, is to borrow money from family or friends. Use this personal loan to pay off your credit cards, and then make regular payments to your ‘friendly lender.’ This is easier said than done, of course. Many relationships have been ruined over money, so be careful. Make sure any agreement you have is in writing and you establish a contingency plan in case you fail to make payments.

Is it a Good Idea to Consolidate Debt?

Now that you know how to consolidate debt, the next question you might be asking yourself is: is it a good idea to consolidate debt? While traditional debt consolidation loans can end up hurting your credit or tempt you to start using your credit cards again once they are paid off, the debt consolidation alternative provided by InCharge has few downsides. You are getting the convenience of consolidating your debt into one payment, lower interest rates and a path to paying off your debt in three to five years. You won’t be able to use your credit cards after enrolling, so you won’t be tempted to acquire more debt. In summary, yes, it is a good idea to consolidate debt. Get started today by calling or starting online debt consolidation.

How Does Debt Consolidation Affect Your Credit Score?

Debt consolidation should have a positive effect on your credit score because it will reduce the credit utilization that accounts for 30% of your credit score.

The fact that you enrolled indicates that you overspent with credit cards and that is a negative in computing your credit score.  Credit utilization is the percentage of spending based on your credit limit. If you have a $1,000 credit limit and charge $500 on your credit card, you have a credit utilization ratio of 50%. Lenders want to see you spend 30% or less of your credit limit each month.

The reason most consumers consolidate debt is because they have maxed-out multiple credit cards, which obviously puts them well over their credit utilization ratio.

The credit utilization ratio only considers revolving lines of credit and not installment loans. Transferring your debts from credit cards to a consolidation loan will reduce your credit utilization ratio and improve your credit score.

Most credit counselors advise you to close credit accounts when consolidating credit. This is a good idea if it stops you from using multiple credit cards to rack up debt.  Just understand that your credit score will take an initial hit from closing credit accounts. Length of credit history makes up 15% of a credit score, and the older the credit account, the better it is for your score.

This shouldn’t be an issue since your primary goal should be paying off your debt. Until then, your credit score isn’t important.  What’s more important is to make your monthly payments, and, in the future, keep your credit card balance below 30% of the limit. Payment history and utilization ratio account for 65% of your credit score.

Should I get a debt consolidation loan to pay off credit cards?

There is no definitive answer for this because each consumer’s situation has unique factors to account for, but generally speaking, a debt consolidation loan is a good way to pay off credit cards if it reduces the amount of interest you’re paying on your debt and simplifies the payment process.

In most cases, having multiple credit cards means keeping up with varying interest rates, minimum payments and due dates for payments. That can be a dizzying experience that leads to frustration and defeat.

A debt consolidation loan shrinks your obligations to a single payment to single lender, once a month. If nothing else, it’s makes drawing up and sticking to a budget easier.

The problem comes in doing the calculations necessary to confirm that there also is a financial gain to using a single loan to pay off unsecured debt. That takes time and discipline, but if done properly, you could find out that a debt consolidation loan is not only easier to handle, it’s more beneficial financially.

How Nonprofit Debt Consolidation Works

A nonprofit debt consolidation program offers many of the benefits of traditional debt consolidation with few of the negatives.

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Online Debt Consolidation

You can enroll in an online debt consolidation program, if you qualify through nonprofit credit counseling.

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Credit Consolidation

Learn the pros and cons of different credit consolidation options including online consolidation loans from Lending Club, Debt Settlement options and nonprofit debt consolidation services.

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