Debt Consolidation 101: How to Make an Effective Debt Consolidation Plan

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Did you know?

About 75% of all Americans carry debt. In fact, that debt came in around $38,000 per household back in 2018. The amount owed is increasing each year.

It’s important you take control of debt before it controls you.

What you need is a plan. More specifically, you need a debt consolidation plan.

What is a debt consolidation plan? How do you create and stick to one? And, what are the resources that’ll help you control personal finances? Read on.

What Is a Debt Consolidation Plan?

A debt consolidation plan is both a strategy and a solution for debt repayment.

  • Strategy — You will learn ways to manage finances better
  • Solution — You gain financial opportunities to improve upon strategies

A credit counseling company is the one providing this debt consolidation plan. The professional, or team, work with you in understanding debt. They’re also the ones working on your behalf with the debtors.

What do you stand to gain from using debt consolidation planning services?

  • Guidance from a financial expert with your best interest in mind
  • A larger, lump-sum monthly payment versus several smaller accounts
  • Less pestering from debt collectors and financial institutions

You also stand to gain a realistic roadmap for financial freedom. This is a powerful way to fix unhealthy financial behaviors. And, adds a layer of accountability and drive for many of those who are debt procrastinators

How to Make a Realistic Debt Consolidation Plan

Making a debt consolidation plan is a collaborative effort. It’s a lot like seeing your doctor in which you need to be 100% transparent with the person helping. Except, this financial expert is there to make your finances all better.

Here is what you’ll want to do before seeing a credit counselor:

  1. Gather every document you can that lays out your finances
  2. Get your credit report to know exactly where you stand
  3. Take control of any smaller debts that are within your budget

Be prepared to feel exposed when you hand over your financial documents. The counselor needs to see everything so they can develop an effective plan. Likewise, it’s good to know where you’re starting from by getting that credit report.

What about paying down smaller debts? Well, you could leave them in there for the debt consolidation plan. Or, knock them out so there’s less to deal with and get a nice “win” when going into the process.

When it comes time to start debt consolidation planning:

  1. Research debt consolidation agency’s and credit counseling solutions
  2. Collaborate with the counselor to understand your personal finances
  3. Trust in the debt consolidation plan outlined by the credit counselor
  4. Commit to repaying the new account established by the company

The plan brings all of your debt under one account. This creates better payment terms, rates, and requirements. For a small fee, you stand to gain more control over the debt repayment.

The Finer Details of the Debt Consolidation Plan

There are advantages and disadvantages to a debt consolidation plan. It’s important to understand the finer details to know if it’s the right solution for you.

Working with Debthunch, for example, is possible with certain debt types like:

  • Credit cards
  • Personal loans
  • Medical bills
  • Lines of credit
  • Collections
  • Business loans
  • Private student loans

The debt consolidation plan isn’t for outstanding balances on things like home loans, taxes, utilities, and the like.

With us, one of the best solutions to debt problems is restructuring your debt through a line of credit. This consolidates and allows you to pay off your unsecured debt balances at 0% interest between 12-48 months.

Strategies to Stick to the Debt Consolidation Plan

A debt consolidation plan is only as effective as how much effort you put in. You’re still paying the debt in full, but now it’s more manageable. Some of your unhealthy financial behaviors may pop back up during that time.

What can you do to stick to the plan?

  • Adjust Your Lifestyle — Look for ways to scale back. Explore frugal strategies and use the extra savings to pay more toward your debts. Avoid the lifestyle creep that may come from having extra money each month, too. 
  • Get Everyone On Board — Living with a partner? Share the bills? Making big plans together? Your partner should be as much on board with the plan as you are, this way it doesn’t cause tensions.
  • Keep It Front and Center — Make a visual that lets you track the repayment timeline. Or, set up little reminders and encouraging notes each month.
  • Treat Yourself — Don’t cut so much that you’re miserable. This is an easy way back into old, bad financial habits. Instead, set up rewards with milestones to keep spirits high throughout the plan.
  • Get Social — Pop on over to social media platforms to talk about debt. Get inspired by success stories. Share your experiences and tips. Try to have fun in learning about finances and being on this big mission.

You’re encouraged to continually communicate with your credit counselor, too. That’s what you’re paying them for. Get their guidance if you’ve seemed to have hit a rut with the debt consolidation plan. 

Resources for Debt Consolidation and Finances

Tackling sizeable debt takes a good amount of time. This plan may take years to see it to completion. You need to get stoic to the plan and your finances. One way of doing this is by leaning on helpful resources and communities.

Be sure to check out:

  • Our blog where you’ll find tons of great information about debt consolidation
  • Social media channels like Reddit’s /r/PersonalFinance or /r/Debt
  • Helpful tools like YouNeedABudget, Mint, and AnnualCreditReport.com

You could also look into money-focused sites, too. These sites could help you find ways to make extra money to help pay more of your debt! Do whatever’s best to keep yourself engaged during this repayment process.

Don’t Let Debt Dictate Your Days

Taking control of your debt is a tough but rewarding journey. Not having that weight on your shoulders reinvigorates your passion. The freedom that comes with stable finances places you back on track to those big life goals.

What is a debt consolidation plan? Well, it’s more than a plan for taking control of debt… it’s a blueprint for the lifestyle you deserve.

We’d love to help design your financially healthy lifestyle. 

Learn about debt solutions from our team of friendly financial professionals. Explore the best debt consolidation opportunities, today, by seeing your offers.

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