June 26, 2015

When it comes to debt consolidation, find an approach that helps you retrace your past steps so you don’t repeat past mistakes. In some cases, we run into unfortunate situations in life. Debt is often unavoidable, but how you handle excessive credit card debt is up to you. With the help of Christian credit counseling, you learn about debt consolidation. A recent article by time.com suggests ways of avoiding debt consolidation traps. When you are dealing with frugal fatigue after trying to make the minimum payments on credit cards, it’s time for a change. By consolidating debt, you solve many financial problems as long as you do it the best way possible. According to time.com, debt consolidation gives you a more manageable monthly payment as well as a lower interest rate. The average person has about $5,100 of credit card debt, a TransUnion study showed. Owing several thousand is a large or small amount of debt depending on your personal situation.

Acknowledge the root problem

The right way to consolidate debt is to do so after figuring out how you arrived at the current situation. Retrace your steps. Review your credit card statements. In some cases, it might be that you used a credit card while unemployed or after the birth of a baby. Setting up an emergency fund will solve the problem if future situations rock your financial world. Experts say a credit counselor will evaluate your situation and help you identify wants and needs.

Consider a debt management plan

One way to consolidate debt is to enroll in a debt management plan. The time.com article describes a debt management plan as an agreement you make with a nonprofit credit counseling organization and your creditors. Your credit counselor negotiates for you so you pay off debt at a lower interest rate. The wrong way to pay off your debt is by ruining your credit score with a bankruptcy or falling prey to a debt settlement scam.

Stop using your credit cards

When you sign up for a debt management plan, you agree to stop using your credit cards. While going through the process, it becomes easier to live on cash and debt cards. Some people get creative with the “envelope system” of budgeting, which entails dividing cash into different envelopes for various purposes.

Figure out your next step

Having a plan is essential, not just for getting out of debt but for staying out of debt. Saving 10 to 20 percent into an emergency fund, funding your 401(k) up to the company match and fully funding a Roth IRA are a few steps you can take while sticking to your debt management plan. Fortunately, it is easier than ever with automated systems of payment.

At Christian Credit Counselors, we help our clients avoid falling to common debt consolidation traps. We also show you a better alternative to bankruptcy and debt settlement scams. With credit counseling, you learn everything you need to know to live a financial success story.

Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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