You may commit to a secured or unsecured loan, transfer outstanding debt onto a new or existing line of credit, or pool your debt on a balance transfer credit card.
A debt management plan is an agreement between you, your creditors and a nonprofit credit counseling organization.
Your credit counselor works with creditors to consolidate the full amount of your loans at a lower interest rate or for a longer repayment period (three to five years usually).
“If you haven’t changed any habits, you can guarantee you’ll be right back in debt in a matter of months,” Lewis says.
“This is about changing behavior and making sacrifices.” Don’t gloss over your previous actions.
If you don’t come to terms with what got you into debt, it could happen again.
Both Bossler and Lewis have seen it firsthand: Clients promise they won’t rack up insurmountable debt again, but within a few years they’ve returned to their old ways.When you’re drowning in due dates, debt consolidation can sound like a godsend.Your credit cards, line of credit and other loans get consolidated into a lump sum you can tackle at a lower interest rate and with a minimum payment that’s manageable.Perhaps you were pouring too much of your income into basic expenses such as housing, car payments and living costs, and you need to evaluate ways to downgrade.In other cases, the problem could be as simple as reducing overspending on entertainment. Track your spending on a regular basis and evaluate the differences between your needs and wants. She says she prefers to work with clients for months to gauge how serious they are about repaying their debt.It’s typically a knee-jerk reaction as the debtor grasps at straws, but it doesn’t address how their lifestyle sunk them into debt.