Debt consolidation can be an extremely overwhelming and difficult process. It’s already daunting to get out of debt but it’s particularly intimidating for those with multiple debts that become increasingly hard to keep track of. Though difficult to tackle alone, consolidating debt is one solution that simplifies things and helps create a better financial situation for yourself. Here are some tips to help in the debt consolidation process.

1. Create a Money Management Plan

Debt consolidation isn’t worth pursuing if you continue mismanaging your finances. An excellent first step is to take hold of your current finances by creating a budget and stop using your credit cards which will ultimately cause more debt. Don’t create so strict a budget that you have no room for fun stuff like hobbies, entertainment, or unplanned expenses. Set yourself up for success and incorporate funds for fun activities or costs that don’t happen every month, such as holidays or car repairs.

2. Before Consolidating Your Debt, Make Sure It Won’t Negatively Impact Your Credit Score

Since debt consolidation may include closing old lines of credit, it can negatively impact your credit score despite the payoff of making your debt easier to manage. A good practice to avoid this consequence is to refrain from consolidating large debts that would take more than five years to settle or small debts. Though following this rule of thumb may help, there isn’t any sure way to know exactly how debt consolidation will impact your credit, as your score depends on various factors. Proceed with caution and take time to evaluate each debt accordingly.

3. Don’t Make Your Situation Worse

If not done correctly, debt consolidation can worsen your financial situation than if you just worked on paying your debts and stopped using your credit cards. Avoid consolidating debts from high-interest credit cards or loans, predatory secured loans, or payday loans. Though retirement loans may be a good option for some people, they are risky because they come with a large tax bill. Avoid them if you know you won’t be able to pay it off. Reading all of your loan’s terms and conditions is a smart way to make an informed choice for your financial situation.

4. Research Debt Consolidation Products You’re Eligible For

Before committing to the first debt consolidation product that accepts your application, research to ensure you’re receiving the best possible rates and read the fine print so you’re not surprised by anything later. When looking for debt consolidation products, a few things to look out for are interest rates that skyrocket after a single late payment, or personal loans and balance transfer cards with interest rates that are directly tied to your FICO score.

5. Don’t Be Too Proud to Ask For Help – It’s Not an Easy Process!

If you are having trouble figuring out what option is best for you, don’t hesitate to ask for help from debt consolidation experts. Choosing which avenue to consolidate your debt is highly dependent on your specific situation, as one product that may benefit one person can be detrimental to another. Factors to be considered when making your decision are your credit score, legal standing, income, and total debt. Sometimes bankruptcy may be the best option rather than debt consolidation, so make sure to seek professional assistance before making your decision.

Debt Consolidation Specialists

If you’ve done some initial research and find you’re having trouble wrapping your head around your options, consider reaching out to a debt consolidation specialist who knows the ins and outs of the process and will make the process easier for you. They are well-versed in the many products available and will be able to advise you on the best route for your situation that considers your credit score, income, and total debt.