A step-by-step guide to consolidating debt successfully | finder.com
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Achieve your debt consolidation goal

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Kickstart your financial goal and start repaying your debt in 3 weeks with 5 easy steps.

If you’re having trouble keeping up with multiple credit card and loan payments, consolidating your debt can help you lower your interest rate and handle your debts with a single monthly payment — but which option is best will depend on how quickly you can afford to pay off your debts.

Step 1: Collect the information you’ll need.

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Week 1. Start by collecting the information and documents you need to calculate your expenses, including:

  • Bills and expenses. Phone, utility, memberships, rent/mortgage and anything else you pay regularly.
  • Your bank statements. You can download these online at most banks or visit a branch if you don’t have an online account.
  • Any other important financial records. This includes bills, final notices and receipts for everyday purchases like groceries, restaurants and clothing.

Next, let’s exercise our bookkeeping skills:

  1. Write down your expenses for the past month. You can draw this out on paper or start a new spreadsheet to stay organized.
  2. Add everything up. This will give you a ballpark figure for how much you should be budgeting for expenses each month. To be as accurate as possible, calculate your expenses for the last three months and find the average.
  3. Calculate your income. If your expenses exceed your income, you need to re-evaluate. Consider the expendable costs you’re currently engaged in and think about the costs/luxuries you can do without.

Extra tips

  • Go through your inbox and online bank statements to make sure you’re on top of your finances and everything you owe.
  • When calculating how much you owe, remember to consider automatic debits from your account (such as monthly bills or charity donations) that could impact your debt levels. If you decide to consolidate your debts, you’ll need to organize for these direct debits to be taken from your new account.
  • If you’re having trouble calculating how much you spend on fluctuating expenses like grocery and entertainment, keep all of your receipts for a month. If you bank online, you can also keep track of all of your debit card payments.

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Step 2: Check your credit score

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Week 1. Once you know how much you owe and how much to budget, you can start considering which debt consolidation solution offers you the most value. Before you make a decision, you’ll need to consider which options you’re eligible for.

A balance transfer credit card will require a higher credit score than a debt consolidation loan. If you don’t know your score, it’s easy to order a copy of your credit file for free.

If you receive your credit file and find that your score isn’t up to scratch, you might want to improve your credit score before you apply for a new credit card or loan. Keep in mind that rejected applications can have a negative impact on your credit score, so rushing the process and applying for a solution you won’t be approved for could backfire.

Improve your credit score

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Step 3: Compare, compare, compare

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Week 2. If you’re considering consolidating your debt, there are a few key questions you should ask yourself to determine which option is right for you:

  • When does the promotional offer end? If a balance transfer card comes with a 0% offer, it’s likely that it will only last for 6 to 24 months. Calculate whether you could repay your entire balance by the end of this period. If not, consider a debt consolidation loan or a card with a longer promotional period.
  • How much can I transfer? Most balance transfer credit cards only accept balance transfers up to a fixed amount (or a percentage of your total debt).
  • Who can I transfer from? Most providers won’t let you transfer balances from an existing account with the same bank. You might also find that you’re unable to transfer debts from partnered, affiliated or co-owned banks. Confirm which banks you can transfer between.
  • Other fees and features. For balance transfer cards, details such as the annual fee, interest rates on purchases and rewards programs could also impact how you use the card during and after the balance transfer is in place.
  • Eligibility requirements. Make sure you earn the minimum income requirement, have a good credit history and meet any other conditions before applying.

Balance transfer credit cards vs. debt consolidation loans

Compare balance transfer credit cards and debt consolidation loans

Compare debt consolidation loan options

Updated June 25th, 2019
Name Product Filter Values Minimum Credit Score Max. Loan Amount APR
Good to excellent credit
$100,000
5.34% to 35.99%
Get personalized rates in minutes and then choose a loan offer from several top online lenders.
550
$100,000
3.84% to 35.99%
Get connected to competitive loan offers instantly from top online consumer lenders.
640
$40,000
6.95% to 35.89%
A peer-to-peer lender offering fair rates based on your credit score.
680
$100,000
5.99% to 16.24%
No fees. Multiple member perks such as community events and career coaching.
640 FICO®
$35,000
5.99% to 29.99%
A prime lender with multiple repayment methods.
550
$100,000
3.99% to 35.99%
Quickly compare multiple online lenders with competitive rates depending on your credit.
640
$35,000
5.99% to 24.99%
Pay down your debt with a fixed APR and predictable monthly payments.

Compare up to 4 providers

Compare balance transfer credit card options

%
Name Product Balance Transfer APR Balance Transfer Fee Recommended Minimum Credit Score Amount Saved Filter values
0% intro for the first 15 months (then 15.24% to 26.24% variable)
$5 or 3% of the transaction, whichever is greater
680
Earn a $150 bonus statement credit after you spend $1,000 on purchases in the first 3 months. Rates & fees
0% intro for the first 18 months (then 13.24%, 17.24% or 21.24% variable)
$10 or 4% of the transaction, whichever is greater
670
An 18 months 0% intro APR period on both purchases and balance transfers, plus zero foreign transaction fees, makes this is a strong well-rounded card. See Rates and Fees
0% intro for the first 15 months (then 15.24% to 26.24% variable)
$5 or 3% of the transaction, whichever is greater
680
Earn a $150 statement credit after you spend $1,000 or more in purchases with your new card within the first 3 months of card membership. Rates & fees
0% intro for the first 12 months (then 15.24%, 19.24% or 25.24% variable)
$10 or 4% of the transaction, whichever is greater
670
Earn 3% cash back on up to $10,000 in the first 12 months, then 1.5% on all purchases. See Rates and Fees.
0% intro for the first 12 months (then 15.24% to 26.24% variable)
$5 or 3% of the transaction, whichever is greater
680
Earn $250 bonus cash back after you spend $1,000 on purchases in the first 3 months. Rates & fees

Compare up to 4 providers

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Step 4: Apply wisely4_apply-wisely

Week 2. Once you’ve compared your options and decided on one, it’s time to apply for your balance transfer card or debt consolidation loan. Click on the green “Apply now” button on the table to be directed to a secure online application with your preferred bank.

Most online applications will take approximately 10 to 15 minutes to complete and submit. To make sure the application process goes smoothly, ensure that you meet the eligibility requirements and have all of the required documentation on hand before beginning the application. If you apply online, many providers can you give a response within 60 seconds or so based on the information you have provided. If you’re approved, you’ll receive confirmation and information packages regarding the card or loan and your account.

If there’s a problem or the provider needs to cross-check some information you’ve provided, your application status may be left pending. If you haven’t received any feedback for a few days, contact the provider directly to discuss the status of your application.

Pro-tip for balance transfers

If the card has a promotional balance transfer offer, it’s best to apply for the balance transfer while you’re filling out the rest of the application so you can request that your debt is transferred to your new account as soon as possible. This will allow you take advantage of the full length of the promotional offer.

Have the details of your transfer, including how much you need to transfer and where from, ready before beginning the application. If you’ve decided to close your old account, you’ll also need to contact your old bank to organize this.

If you didn’t meet the eligibility requirements or failed to provide the necessary documents, you’ll receive a notification that your application has been rejected.

Remember that multiple rejected applications will have a negative impact on your credit score. If your application is denied, take the time to understand why, compare your options and wait a few weeks before applying again.
Consider debt relief if you don’t qualify for debt consolidation
Step 5: Start consolidating

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be-freeWeek 3. If your application for a balance transfer credit card has been approved, you can expect to receive your card within one to two weeks. If you applied for the balance transfer at the time of application, your balance should’ve transferred to your new account.

If your application for a debt consolidation loan has been approved, you’ll need to start paying off your creditors as soon as the money is deposited into your account.

If you haven’t already, spend some time mapping out a realistic budget and set of goals that’ll help you keep your monthly payments on track.

Use these 3 simple rules to keep yourself moving forward:

  1. Set monthly goals.
  2. Use calendar notifications to remind you when payments are due.
  3. Set a final date for when you’d like to have your debt repaid preferably before the promotional period finishes if you’re using a balance transfer credit card

Bottom line

If you’re having trouble staying on top of multiple credit card and loan payments, consolidating your debt can help you regain control of your finances. Just make sure that your new interest rate is low enough to make it worth your while.

Frequently asked questions

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