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Strategies to Consolidate Your Debt

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Consolidating your debt is a great way to help you manage your finances and pay off your debts faster. It can be particularly beneficial if you live in Florida, as the state has various debt consolidation options available.

Read on to learn about debt consolidation in Florida and all the strategies available, from leveraging the equity in your home to credit counseling.

Debt Consolidation Best Practices

The best part of debt consolidation is paying off your debts quicker and saving money while you’re at it. What’s not to love? However, you want to ensure you’re using this financial strategy effectively. The best options for consolidating your debt are impactful for the long term, helping you achieve your financial goals.

Home Equity Lines of Credit (HELOC): With enough equity in your home, this is a good strategy to get rid of higher interest debt. A HELOC is a revolving line of credit backed by the equity in your home. That means you can borrow up to a limit, pay it back, and then borrow again if the need arises. You can find the amount of equity you have in your home by subtracting your home’s market value from any mortgage balance you have. For example, if your mortgage balance is $100,000 and your home’s market value is $400,000, you have $300,000 in equity. Most financial institutions will let you borrow up to 80% of the home’s equity.

Lowering interest rates: Speaking of interest rates, reducing yours is vital to a solid debt consolidation strategy. Credit card interest rates tend to be extra high, and there are several ways to bundle your debt together and receive a more reasonable rate (which we’ll get into soon!).

Consolidating multiple loans: Simplicity is another hallmark of a sound debt consolidation strategy. Instead of paying various loans to various lenders, you bundle them all together into one or two loans, making them easier to track.

Credit Counseling

People who live in Florida benefit from several debt consolidation support professionals, including credit counselors. Before working with one, you’ll want to understand your options and how credit counseling can help.

Credit counselors help consumers organize their debt, budget effectively, and learn money management tools. These organizations are often not-for-profit, and they’re trained to help specifically with debt and credit issues. A credit counselor will help you analyze your financial situation and determine the best course of action.

Beyond offering financial advice, they will negotiate with creditors to reduce your interest rates or waive fees. They work with creditors to ensure that they are not trying to collect debt while you’re working on paying it down. Basically, credit counselors are advocates who help you reach your debt-free financial goals.

Debt Management Plans

Another option is a debt management plan or DMP. This is similar to working with a credit counselor in that they will help you create a payment schedule with one low monthly payment. However, instead of a counselor supporting your efforts in this strategy, the debt management company collects your money each month and distributes it to lenders.

The benefits of debt management include affordable payments and the potential to save money. A DMP has less of an impact on your credit when compared to a bankruptcy or debt settlement. Creditors will also stop contacting you while you’re making payments with the debt management plan.

Remember, there is often a fee associated with a debt management plan, but it can be waived if you meet specific qualifications. These plans also don’t fix any underlying issues with overspending and don’t address the root cause of why you got into debt.

The Financial Counseling Association of America and the National Foundation for Credit Counseling are great resources for finding a credit counselor and debt management plan. These agencies require that debt-relief companies are certified and meet a high level of quality. Remember to inquire about fees and the mode of counseling available, whether it’s via phone, in-person, or virtually.

Working with a team of professionals is critical for your overall financial health and well-being. Power Financial Credit Union understands that every member needs financial solutions tailored to their lifestyle. Contact us today to learn how we can help you.