Advertiser Disclosure

Pay Down My Debt

A Procrastinator’s Guide to Managing Your Finances

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

iStock

Many of us fall victim to procrastination from time to time. And when it comes to managing your finances, avoiding or delaying tasks can get expensive very quickly.

“Our lives are busy, and sometimes we don’t want to deal with it,” says Gerri Detweiler, education director at the business credit management website Nav and author of “Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights.

In fact, Detweiler remembers the price she paid the year she pushed off renewing her business filings with the state.

“I didn’t get it done right away and paid enormously for it,” she said.

No matter the reason behind your procrastination, it can lead to a financial mess unless you move it to the forefront of your to-do list. Know that it is possible to transform into a doer – even if you’re a habitual procrastinator – by adopting the small changes below to achieve big results down the line.

1. Automate as much as possible

If you’re prone to procrastination, keeping on top of payments can feel overwhelming, especially if you have multiple lenders you need to pay every month. Consider automating your payments so you can avoid late fees and charges. Detweiler advises setting up text or email alerts so you know when payments are due and if there are any changes to the minimum payment amount. You can set up automatic payments with either the lender or through your bank’s bill pay tool; all you have to do is just make sure you have enough money in your account to cover what you owe.

2. Consolidate debt so you have fewer bills to keep track of

The average person has 3.06 bank cards and 2.5 retail cards, according to Experian’s 2018 State of Credit Report. Detweiler advises keeping two credit cards active at any given time: one with a lower interest rate to use for bigger purchases where you can revolve a balance, and a second credit card that is used for everything else, including earning rewards, that you pay off in full at the end of month. Then, put the rest of your cards in a drawer once they’re paid off and use them only occasionally to keep the accounts from being closed by the issuer.

If you have multiple high-interest credit card balances, you may be able to qualify for a balance transfer card offering 0% interest for a specific period of time. While most balance transfer deals charge a 3% balance transfer fee, which is added to the amount you transfer, it may make financial sense to move multiple balances to one card with one payment. Then, devise a repayment plan to knock down that balance as much as possible during the no-interest period as your payments will all be directed toward the principal until the 0% offer has expired.

Another option is to consolidate multiple card balances or other debts with a debt consolidation loan. Depending on how good your credit score is, you may be able to find a lender offering an interest rate lower than what you’re paying on your credit cards. The beauty of a debt consolidation loan is that you can use it to pay off your debts and then have one fixed payment over a specific period of time, generally two to five years. Of course, this will only help if you have the discipline to refrain from adding new debts or purchases to your now-cleared credit cards.

If you’re really struggling and over your head with your finances, consider talking to a credit counselor that can put you on a debt management plan.

3. Turn to technology to help change behavior

If you’re a procrastinator, relying on your willpower can be challenging. Thankfully, technology can help with that. Consider turning to apps or websites to help change any unhealthy behaviors and transform any bad habits.

For instance, you could download a robo-saving app, such as Digit, or enroll in a savings program like Bank of America’s Keep the Change, that help make saving as painless and out-of-mind as possible. Remember that small financial goals (like saving $5 per day versus $150 per month) will seem more achievable and can help lead to big improvements.

Other apps or websites aggregate information about multiple accounts, so you can see what’s due and what’s outstanding on a weekly or monthly basis, can also come in handy. Detweiler suggests Mint, Credit Karma, or the EveryDollar budget app. She also suggests setting reminders so you can remember to log in regularly. When you see the progress you’ve made in a chart or graph, it acts like a reward that is sent to your brain, which is key to long-lasting behavior changes, as journalist Charles Duhigg noted in his book “The Power of Habit.”

Whether your procrastination is the result of being really bad at time management or overly demanding standards that result in unhealthy levels of perfectionism, it helps to be aware of what’s causing any counterproductive, irrational behavior so you can determine how to do better.

For instance, if you’re really bad at estimating how long it’ll take you to finish a task, then make a habit of starting earlier than you normally would. Or, if your overly demanding standards stop you from getting started, then remind yourself before you start the task that “done” is better than perfect and think back to times that procrastination has proven harmful to you.

Changing behaviors, like managing your time better or reducing any anxiety you feel when tackling big tasks (like paying multiple lenders every month), can be challenging, but not impossible. Breaking things down into small, simpler tasks and using technology to help you as much as possible can set you on a fresh path to break unhealthy habits and lead to big improvements on your finances.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Get Personal Loan Offers
Up to $50,000

$

Won’t impact your credit score

Advertiser Disclosure

Pay Down My Debt

Debt Consolidation 101: What It Is, How It Works and Where to Find Loans

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Juggling debts with different payment due dates, amounts and interest rates can be a headache. It can get even worse when you’re tight on money and don’t know when you’ll be debt-free.

Debt consolidation is one way to simplify your finances. By merging multiple credit card bills and loans into one monthly payment with more favorable terms, debt consolidation can help get you out of the red faster and/or make your monthly payments more manageable.

Here’s a look at how debt consolidation works, how it may affect your credit and different ways you may consolidate your debt.

How does debt consolidation work?

Debt consolidation involves taking out a new loan (often a debt consolidation loan) and using it to pay off other unsecured consumer debts, such as credit card bills. The new loan should have more favorable terms, such as a lower APR, to make repaying your debt more affordable or simply easier.

There are several products you may choose from to consolidate your debt:

How debt consolidation may help improve your credit score

  • It can help you pay down your debt sooner. A consolidation loan with a fixed term or an expiration date on a promotional period can be a powerful motivator to repaying your old debts sooner. Less debt can increase your credit score, making you more liable to qualify for better loan products later. The amount you owe on your accounts compared to your income determines 30% of your FICO® Score, a type of credit score commonly used by lenders.
  • Thanks to flexible terms, you can build a history of regular, on-time payments. If you’ve struggled with making payments in the past, you could choose a longer repayment term for lower, more manageable monthly payments in the future. Positive payment history is the most significant factor in calculating your FICO Score, at a whopping 35%. Showing a history of payments that are on-time and in full makes you come across as a more reliable borrower.
  • May lower your credit utilization ratio, if you use a loan to do so. The more revolving debt you pay off, the less you’re using from the total amount of revolving credit available to you, which helps lower your credit utilization ratio. This ratio determines 30% of your credit score. Ideally, you should keep your ratio at under 30%.

Where to find debt consolidation loans

You can apply for a debt consolidation loan through a variety of lenders, including banks, credit unions and online lenders. You may explore lenders using our debt consolidation marketplace.

To help you kickstart your search, you can review the below three lenders.

Debt consolidation loan lenders
 

Peerform

Learn more

Best Egg

Learn more

Upstart

Learn more

APR

5.99% to 25.05%

5.99% to 29.99%

6.46% to 35.99%

Terms

36 or 60 months

36 or 60 months

36 or 60 months

Borrowing limits

$4,000 to $25,000

$3,000 to $35,000

$1,000 to $50,000

Origination fee

1.00% - 5.00%

0.99% - 5.99%

Up to 8.00%

Minimum credit score requirement

600

700

620

Are there debt consolidation loans for bad credit?

While you can get a debt consolidation loan for bad credit (below 670), as long as you have enough money for the minimum monthly payments, it may not be worth your while. The worse your credit, the higher your interest rate can be and the more you will have to pay, including origination and other fees, to consolidate your debt.

Keep this in mind as you shop for lenders willing to consider factors beyond your credit score such as your job history or education. Some of your best bets could be online lenders who could offer more flexible terms, or credit unions whose interest rates are capped at 18%. Tapping into your home equity or getting a secured loan (see above) are some other options, but keep in mind the risk of losing your assets if you default on your payments.

Is debt consolidation a good idea? How to decide for yourself

Depending on your individual circumstances, such as your monthly income, type of debts, credit score, and willingness to change your spending habits, debt consolidation may or may not be a good idea.

When debt consolidation is a good option …

  • The reasons behind the financial decisions that led you into debt are clear and you’re committed to ensuring it won’t happen again.
  • You’ve met with a credit counselor or financial advisor to put together a realistic budget (or are confident in your ability to do so on your own)
  • All your other options to get out of debt have been researched and explored
  • Committing to the monthly payments and terms of the consolidation loan are achievable
  • You’re saving money compared to what you were paying previously on all your debts

When debt consolidation might not be the right option …

  • Decreasing your expenses might not be possible and you might rack up balances on old credit lines
  • You’d need a secured loan for good interest rates but you’re risk-averse or worry you won’t be able to keep up with payments
  • Savings are negligible or nonexistent after paying the interest rate and associated fees of a debt consolidation loan

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Get Personal Loan Offers
Up to $50,000

$

Won’t impact your credit score

Advertiser Disclosure

Pay Down My Debt

What Is Debt Consolidation?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

Debt consolidation rolls several debts into one easy-to-manage payment. It’s a strategy you can use to simplify the debt payoff process and save some money on interest. If you’re overwhelmed with multiple high interest debts, it may be just what you need to become debt-free faster.

How does debt consolidation work?

If you have many unsecured debts to pay off, you can turn them into a single monthly payment through debt consolidation. When you consolidate your debt, you won’t have to manage different payments, interest rates, payment dates and payback periods. You’ll eliminate confusion and make the process of repaying debt more manageable.

While there are several debt consolidation strategies at your disposal, a debt consolidation loan is a popular option. A debt consolidation loan is a personal loan you use to combine multiple debts with a new one, ideally with a lower interest rate and more favorable terms. You’ll receive a lump sum of cash to pay off your debts, and then make a single monthly payment on your new loan. (Some lenders can pay off your creditors directly, however.)

You can use debt consolidation to pay off consumer debt such as:

  • Credit cards
  • Medical bills
  • Utility bills
  • Payday loans
  • Taxes
  • Collection bills

Once you figure out all the unsecured debt you owe, use our debt consolidation loan calculator to get an idea of how long it will take you to repay them. The calculator compares the cost of all your debts versus the cost for a debt consolidation loan. It can help you determine how much money you can potentially save.

Pros and cons of debt consolidation

Pros:

Cons:

  • One monthly debt bill: Since you’ll only have to make one monthly debt payment rather than several, you’ll find the debt payoff process to be much easier.
  • May save money on interest: If you have high interest rates on your existing debts, consolidating them to a lower interest rate can allow you to save money over time.
  • Lower monthly payments: With debt consolidation, you can reduce your monthly payments through a lower interest rate and, if you choose, a longer repayment term.
  • Can pay off debt faster: A lower interest rate and a single debt bill can allow you to become debt-free faster than if you were to keep your multiple debt payments.

  • Potential fees: Some lenders charge an origination fee to take out a loan. Others may charge you a prepayment penalty if you pay off your debt early.
  • Can be hard to qualify: Traditional debt consolidation loans are unsecured personal loans, which require great credit to receive the best interest rates.
  • Does not solve an overspending problem: While debt consolidation can be a helpful strategy, it won’t help you control your spending and stay out of debt.

Where to find debt consolidation loans

Banks, credit unions and online lenders all offer debt consolidation loans. Here are a few options you can choose from.

Debt consolidation loan lenders
 

FreedomPlus

Learn more

Peerform

Learn more

SoFi

Learn more

APR

5.99%-29.99%

5.99%-25.05%

5.99%-18.82%

Terms

24 to 60 months

36 or 60 months

24 to 84 months

Borrowing limits

$7,500 to $40,000

$4,000 to $25,000

$5,000 to $100,000

Origination fee

0.00% - 4.99%

1.00% - 5.00%

No origination fee

Minimum credit score requirement

Varies

600

680

How to shop debt consolidation lenders

You can compare debt consolidation loans in our personal loan marketplace. You’ll want to review such information as:

  • Interest rates
  • Borrowing limits
  • Repayment terms
  • Fee structures
  • Minimum credit score requirements

Online lenders tend to offer the most competitive loan terms, as they have lower overhead costs compared with banks. However, if you prefer having face-to-face time with your lender, you could seek information from local banks. Credit unions can be a great option as well, as they are member-run and may have fewer fees.

Is debt consolidation worth it?

Consider the following questions as you weigh whether debt consolidation is right for you:

  • Are you overwhelmed by multiple debts?
  • Would you like to potentially save money on interest charges?
  • Do you wish you had lower monthly payments?
  • Do you have a plan in place for staying out of debt in the future?
  • Do you have a good to excellent credit score?

If you’re an individual with good credit who is looking for an easier way to manage your debt, you may benefit from consolidation. However, if you’re dealing with a spending problem and don’t have the best credit, this strategy may not be a good fit.

3 debt consolidation alternatives

Balance transfer credit card

A common alternative to a debt consolidation loan is a balance transfer. With this repayment strategy, you’ll take out a balance transfer card and move your existing credit card debt onto it. The benefit of a balance transfer card is that they commonly come with a promotional 0% APR. You can avoid interest charges by repaying your debt in full during the promotional period.

However, if you don’t repay your debt in full, you’ll be responsible for all of the interest that accrued. There’s also a balance transfer fee you’ll typically pay; it’ll be a percentage of the balance you transfer. That said, this strategy is best for consumers who can aggressively repay what they owe and are sure the balance transfer fees they’ll pay will be offset by the amount they save on interest.

Pros

Cons

  • Move your debt to a better credit card: Depending on the card you get approved for, you may be able to move your debt to a card with a lower interest rate and more favorable terms.
  • Interest savings: You can consolidate your credit card debt into a single credit card with a 0% or low promotional APR that can save you money on interest.
  • Can help your credit: If you use your credit transfer card to reduce your credit utilization ratio, pay down debt faster and lower your balance to zero, you can improve your credit.

  • Balance transfer fee: While balance transfer fees vary, most credit cards charge 3% of the balance.
  • Promotional APRs expire quickly: These APRs last about 12 to 21 months. After this period, the card will function like a typical credit card and the interest rate will go back up.
  • Can add to debt: If you have a spending problem, a balance transfer card can make it worse and put you in more debt by freeing up your old credit lines.

Debt settlement

Debt settlement involves negotiating with your creditors to settle for less than what you owe. You can hire a debt settlement company to negotiate with creditors on your behalf, though that may be a risky move. That’s because some debt settlement companies will ask you to stop making payments in order to starve creditors into negotiating over a payoff amount; you’re also liable to pay fees.

Pros

Cons

  • Potential to reduce your debt: Debt settlement can lower the amount of debt you owe to various creditors.
  • One deposit every month: If you hire a debt settlement company, you’ll deposit money into a special account every month. As your balance goes up, they’ll contact your creditors to negotiate lower settlement amounts.
  • Can pay off debt faster: With debt settlement, you may be able to settle your debt in only 24 to 48 months.

  • No guarantees: Your creditors are under no obligation to negotiate over your debt.
  • Your credit will take a hit: When you settle a debt, your credit report will show that a debt was paid off for less than the full amount.
  • High fee: If you opt for a debt settlement company, you may owe them a fee of 15% of your total debt once it settles.
  • Tax consequences: You may have to pay taxes on the portion of your debt that is forgiven by creditors.

Bankruptcy

Bankruptcy is a legal process where your assets are used to pay off debts (Chapter 7) or you repay debt via a debt repayment plan (Chapter 13). Since bankruptcy comes with long-term legal and financial consequences, it’s wise to consult a bankruptcy lawyer before pursuing it.

Pros

Cons

  • Relief from collection activity: Once you file for bankruptcy, most debt collectors will stop contacting you.
  • Chance to discharge your debts: If you are overwhelmed with debt, bankruptcy can allow you to wipe them out.
  • A short process: Chapter 7 bankruptcy only takes 4 months, on average.

  • May lose some of your assets: If you opt for Chapter 7, you may lose your home and other assets.
  • Negative long-term impact to your credit: While Chapter 7 bankruptcy stays on your credit report for 10 years, Chapter 13 remains for seven years.
  • Strict qualifications: You’ll have to meet certain income criteria if you wish to pursue Chapter 7. If you don’t qualify, Chapter 13 may be your only option.

Debt consolidation can be a great way for you to take control of your debt and improve your finances. However, it is not right for everyone so it’s important to do your research before you take the plunge.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Get Personal Loan Offers
Up to $50,000

$

Won’t impact your credit score