Six Things to Try Before Debt Consolidation

Too many people think of debt consolidation as an easy fix for their debt problems. But easy fixes aren’t always the right solution. If you’ve been thinking about consolidating your debt, take a few moments to ponder these six things you can try first.

1. Eliminate easy access to your credit cards

This isn’t going to make your debt go away, but it is going to keep you from incurring new debt. Whether or not you opt for debt consolidation, you will have to stop using credit. You can come up with all the excuses in the world to justify using credit, but really, you’re only hurting yourself.

2. Live within your means

These four little words are the words you need to live by – starting right now. These words probably aren’t the words you want to hear, but they’re a lot better than hearing all those nasty remarks your creditors are making to you and about you! Take a very close look at your expenditures to determine what you can cut out now. You’ll almost always find something.

If you eat lunch out every day, brown bag it. If you get your nails done weekly, start doing your own manicures. Even if all you can do is eliminate late fees and overdraft fees, you’ll free up money that you can put towards paying down your bills. Give living within your means a try and you’ll see what a difference it can

3. Get a second job

This won’t work for everybody but if can swing it, getting another job – even if it’s part-time – gives you extra money that can be used to pay down your debt. You won’t have to work two jobs forever; just long enough to get your debt under control. Have this paycheck direct deposited and use online banking to set up your bill paying and you won’t even be tempted by this extra income.

4. Negotiate with your creditors

Too many people mistakenly believe that because they’re having trouble paying their bills, creditors won’t work out alternate arrangements. This isn’t true! Creditors need you to pay your bills because that’s how they make money. So start calling creditors to explain your situation and then see if you can at least negotiate a lower interest rate. If all your bills come due around the same time, ask about changing your billing cycle. You’ll never know what creditors will agree to until you ask. Remember, every little bit helps.

5. Pay down high interest debt first

After you’ve reined in your expenses, increased your income (or at least freed up some cash) and negotiated with creditors, organize your debt from highest interest rate to lowest. The goal here is to focus on paying off the debt with the highest interest rates. You’ll still have to make payments on all your debt each month. You’ll just apply all extra income towards the bill charging the most interest. When that bill has a zero balance, start the process over and tackle the bill with the next highest interest rate. Keep repeating until all your bills are paid off.

6. File for bankruptcy

This might seem like an unreasonable solution, but let’s face it. If you’re so deep in debt that consolidating is just going to prolong the inevitable, cut your losses now and declare bankruptcy. The sooner you do, the sooner you can start repairing your damaged credit. You’ll be amazed at the difference you can make after just 2 years of positive credit usage.

You can overcome your debt troubles, but it’s going to require hard work, dedication and most importantly, lifestyle changes.