How to Do a Cash Out Refinance to Consolidate Debts

If you are a homeowner and have found yourself in need of funds at any point, you have probably heard of a home equity loan or home equity line of credit, both of which are very helpful options under the right circumstances. However, there is another option that many find even more helpful: a cash out refinance to consolidate debts.

This may be your first time hearing that term. You are not alone if that is the case. It is not mentioned anywhere near as much as home equity loans, but a cash out refinance can be more helpful in many situations. One great time to consider a cash out refinance is when you want to consolidate debts. So let’s explain how you can do this.

What is a Cash Out Refinance?

If you are currently paying off a mortgage loan and have been for some time, there is a good chance you have some equity in it. Equity is how much of the home you actually own. For instance, if you bought a $100,000 house and you have $25,000 equity in it, then you currently own $25,000 worth of the house while the other $75,000 is still being paid with your mortgage payments. As you pay more, your equity increases. You have the ability to borrow money on the amount of equity you have in the home.

You may be saying that this sounds an awful lot like a home equity loan. They are similar, but they are also different. A regular home equity loan actually becomes a completely separate loan from your current mortgage, meaning that you end up with two separate payments.

A cash out refinance puts your current mortgage loan and your equity loan into one lump sum payment, leaving you with one loan. In other words, the cash out refinance loan will cover the full $100,000 again (minus any costs, fees, and so on). It will pay the $75,000 to your current mortgage loan, and you get the remainder. You then have to repay the one $100,000 loan.

Will That Not Just Add Debt?

If you are anything like me, your initial reaction to paying down debt is, “Whew! I am not getting into debt again!” So the idea of doing a cash out refinance to consolidate debts or for any other reason sounds a bit counterproductive, especially if you barely got your mortgage paid down. There are, however, some potential benefits to a cash out refinance to consolidate debts, and for other purposes. Let’s break it down some.

A Cash out Refinance to Get Out of Debt

A loan to get out of debt? Is that a thing? Yes, it actually is. So how can doing a cash out refinance to consolidate debt help if you will still be in debt? It is actually simpler than it sounds, so we will keep the numbers simple as well. Let’s say your debts look something like this:


While yours may look different, you get the point. The above debts are just some that I have seen recently.

These payments come out to $975 per month- and that is with the minimum payments on credit cards. If you are not aware, paying only minimum payments on credit cards is going to keep you in debt- forever- so those balances do not decrease each month. They actually increase- every…single…month.

At this moment, your debts come to a total of $81,900. Remember that this includes your mortgage. If your home cost a total of $100,000, $40,000 of which you have paid down and own. You could go do a cash out refinance to consolidate debts in the amount of $81,900. $60,000 of it would go to the mortgage and $31,900 would go to your debts.

Now, let’s say you also got a lower interest rate this time of 5% instead of 10%. If you chose a 30 year mortgage, your payment would go down to around $300, which would cover EVERYTHING, not just the mortgage. If you have paid off your debt with that loan, you now only owe your refinance loan. So you have gone from paying out $975 a month on debts- including credit cards that you will not be paying off with the current payment- to paying out about $300 per month. Even if you do a 15 year mortgage instead and have around a $500 payment per month, you are still winning. As you can see, this can be a great way to get your finances in order. 

If you choose to, you could get a loan for more than what you actually need, but we are trying to stay out of debt, remember? Getting more than you need is probably not a good idea unless there is a good purpose for it, like sending your kiddos to college or something similar. Shopping sprees? Probably not a good idea.

7 Careful Steps To Consolidate Debt Without Tripping

 Why Would I Want to Do That?

Some people’s initial reaction to this information will be utter astonishment that someone would want to do such a thing. Yes, it sounds a little crazy- until you consider what it can do for you. But there are good reasons for a cash out refinance. Some people do a cash out refinance to consolidate debts. Other common reasons are home remodeling projects, college costs for their kids, buying a new car, tax deduction, better terms, lower or fixed rate, pay off high-interest debts, buying an investment property or second home, investments, starting a business, illnesses or emergencies not covered by insurance or emergency funds etc.

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What is Your “Why”?

Why are you considering doing a cash out refinance to consolidate debts? Obviously, yes, to consolidate debts, but why do you want to consolidate them? Is it to lower your monthly bill total? Improve your credit score? Start a business? Send your kids to college? Go on vacation? Invest?

The thing is that it is still a loan, and a loan has to be repaid. If this loan will, logically speaking, but you in a better financial spot, it is probably a good idea. To help you determine if this is the case, answer the following:

  • Will it save me money every month?
  • Will it lower my interest rates or eradicate high-interest debt?
  • Is the money going into starting a business or other money-making venture that will generate additional cash flow? Will that cash flow be larger than my loan payment?
  • Will I owe out more or less after I get the loan?

Is It In Line with Your Beliefs and Values?

This may seem like an odd question, but there is a purpose. If the money is going toward something you completely believe in, like college funds or ministries, it will seem like a lot less hassle to repay it than something you care nothing about. For instance, I firmly believe in providing my kids with what they need, including a head start in adulthood, sending them to college, and supporting ministries that help those in need.

This means that, for me, I would be more inclined to get into debt and repay a loan if I were doing it for college costs, to help my kids buy their first home, or to donate to a ministry that helps build homes for the homeless and feeds the hungry. That debt would not seem like such a burden. If you are considering the refinance option, make sure you believe in what you are doing. If you do not, even doing a cash out refinance to consolidate debts is going to feel miserable over time.

Benefits of a Cash Out Refinance to Consolidate Debts

Though the benefits may change from person to person, some of the potential main benefits include:

  • It might lower your monthly payments.
  • You might find lower interest rates than you currently pay.
  • Paying off debt helps to improve credit scores.
  • It can help build better credit by paying off debts and it opens up a new account. If you pay on time, your credit will continually improve.
  • If you pay off your debts and are no longer paying those monthly payments, you increase your cash flow, which is always nice.
  • You can stop debt collection agencies from calling you- talk about relief.

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Risks of a Cash Out Refinance to Consolidate Debts

As many benefits as there are, there are also risks and downsides to doing a cash out refinance to consolidate debts. It is important to be aware of these before making a decision.

  • Most, if not all, cash out refinance loans will require you to pay closing costs….again. It probably was not very fun the first time, so it is probably not something you want to do a second time. Ask around and read the fine print to find a lender that does not charge closing costs.
  • If you are not careful, you could wind up with a higher interest rate than before. Obviously, this is not what you want, so make sure you are paying attention to the loan terms.
  • You might be putting off retirement to pay off your loan. I do not know when you plan to retire, but if you are getting another 30-year mortgage, you might be working longer than you wanted.

Still Not Sure?

You could also speak with a financial advisor or a loan officer. Word of warning on that, though, if the person you are speaking to will be affected in some way by your choice, do not just take their advice and run with it. Weigh out what they say against what you have learned. Have them show you- preferably in very easy to understand numbers- how exactly this cash out refinance to consolidate debts could hurt or help.

Maybe I am asking too much, but I personally prefer looking at numerical information through charts and graphs to see how something will affect me. I am not so sure every loan officer and financial advisor feel the same way though. As long as they can show it clearly so you can fully understand, you should be good to go.

Also, try not to just jump into a decision. Again, this is a big move. Rushing into it might put you in a worse financial state than you are now. Take the time to really consider your options before you decide.

How to Do a Cash Out Refinance?

First, you have to understand that not everyone will get approved for a cash out refinance to consolidate debt. It is still a loan, so your credit will need to be checked as well as your payment history up until this point. If you have not been so good at paying your first mortgage on time, there is a good chance that the lender will not want to lend to you.

If your credit and payment history are good enough, though, your next step is to go back over all of the information above and be 100% certain this is what you want to do. Once you are sure that you are sure, it is time to start looking for your loan.

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How to Shop for a Mortgage

Understanding the mortgage process is pretty important if you’re thinking about getting into it. If you just jump online and type, “how to get a consolidation loan”, you are going to be bombarded with results and quickly overwhelmed. However, online is typically where to shop for a mortgage loan because you have a gold mine of options.

Whether shopping online or going to the bank, it is important to find a lender who is credible and who is trustworthy to keep their word when it comes to following the terms and conditions of the loan agreement in the initial stage of the application. Here, on Loanry, you can find it! By putting in your information here, you can check if you qualify for a loan with one of the carefully selected reputable lenders:

It is important that you find an interest rate that is lower than the one you currently pay. If it is higher, you are costing yourself money that you do not need to. You can always consider a cash out refinance later when rates drop. If you are using your money to consolidate debts, it might be okay if the interest rate is the same- though you would really need to do some calculations. Regardless, you do not need one higher. Even lower your rate by ½% saves you a lot of money over the life of the loan, so search until you find the best rate possible.

As you can see, knowing how to shop for a mortgage, or any other type of loan is important so you can make the best decision for yourself.


As you can hopefully see, a cash out refinance to consolidate debts can be a really good idea, but you have to think it through to make sure that it is good for you. Consider your entire financial state at this time, and how long you are willing to pay on your new loan. Get advice if you need to, and definitely talk it over with your spouse if you are married. Weigh out the pros and cons, then make the best decision you possibly can with the information you have.

The Ultimate Guide To Build A Budget On Low Income

Doing anything with a low income is difficult. Or is it? Having a low income does not have to be the end of the world. If you are struggling, then maybe you just need to learn how to build a budget — and stick to it. Building a budget on low income can be challenging if you don’t know how. So the first thing you need to do is learn about financial literacy and what financial literacy organizations are out there to help you. Once you do that, you will be ready to start learning what a budget is and how you can use it to your own advantage.

How to Create Your Own Budget on Low Income

The first thing you have to do when creating your own budget is gathering information. You need to know how much money comes in and how much money goes out of your bank account every month. This means knowing your income and your expenses. When you know that you are making a budget on low income, you may feel a bit discouraged. But do not worry. You are definitely not the only one in this situation. In fact, you belong to the majority, and if they manage to budget on low income, so can you. So let’s see how to do that.

If you have a set salary, then you have a fixed monthly income, but if you have an hourly job, then your income may slightly change month to month. If you work an hourly job, then you can use an average monthly salary in order to make your budget. Your expenses can be either fixed or variable.

Types of Expenses

Fixed expenses are expenses that occur every month, at the relatively same price, such as rent, gas, electric, water, a gym membership, your Netflix account, and student loan payments.

Variable expenses are expenses that you do not necessarily have every month, or that the total cost is different every month. This could include groceries, eating out, going to the movie theater, or buying a present for your friend’s birthday. These expenses cannot necessarily be planned months in advance, but they can be budgeted; you can — and should — budget some extra money as a buffer, for things like fun — such as going out with your friends — or for emergency — such as emergency medical care.

And Now – Let’s Make That Budget on Low Income

Once you have gathered all the information you need, it is time to start making your budget. Remember, the tips here are just general, but your budget is specific to your wants and needs.


You need to prioritize what is important to you in order to make a budget that will help you. If you don’t adjust your budget according to your own personal financial goals, then it will be impossible for you to stay on budget and continue to hold yourself responsible. When your income is low, this becomes more difficult, since you really need to focus on the most important things and leave everything else until you see if you will have enough money for it.

Needless to say, utility bills and mortgage/credit card payments should be your priority. After you secured that you have electricity, water, heating and that you do not fall behind with your payments, then comes everything else. Here’s where you want to see how much money you have left in your budget, and what you want to finance the most.

The End Result

You know made a list of your priorities. Paying your bills on time and paying off your mortgage/credit cards/debt is in the top of that list. Everything else after is ordered according to your wishes and needs. Once you know why you have a budget — and understand how it can help you achieve your goals — you will be much more likely to stay on track. Also, don’t forget to keep your goals realistic. Realistic goals allow you to actually see progress. If you have unrealistic goals that you cannot meet, then you co
uld be discouraged from sticking to any parts of your budget.

What is Financial Literacy?

To be able to make the above-mentioned budget and stick to it, it is wise to educate yourself. We mentioned a couple of things you should keep in mind, and we’re going to go over them right now. The first is financial literacy. According to Dave Ramsey, it involves “[helping] people develop a stronger understanding of basic financial concepts…[in order to]…handle their money better.” Basically financial literacy is what you are doing right now. You are here to learn more about basic financial concepts — such as budgeting and debt — in order to handle your money better.

Though there are different ideas of what financial literacy entails, some believe that there are five key components of financial literacy. These key components will help you handle your money better and have an overall healthier relationship with money. The five components include understanding the basics of budgeting, understanding interest rates, prioritizing saving, understanding and being able to recognize credit-debt cycle traps, and identifying theft issues and safety.


The Importance of Financial Literacy Components

Budgeting is important for many reasons, but one of the biggest reasons is that it helps you keep yourself accountable when it comes to your spending. Understanding interest rates can help you save a lot of money over time, by making sure you don’t end up paying much more than you need to over time. Prioritizing saving is essential to financial literacy because saving now will be a better investment in your future. Now that you know how to budget on low income, you will be able to manage your finances more smoothly and it will definitely help improve your situation.

For instance, you may want to buy the newest iPhone model coming out, even though the last version still works perfectly, but if you save the money, you could end up being to get yourself something much better in the future — such as a family trip.

Understanding the credit-debt cycle traps can help save you a lot of trouble in the future, since it is much easier to ruin your credit than to make your credit better. Identifying theft issues and safety is a big issue in our modern, technological world. Because of all the secure data we store and share online, identity theft is more likely to occur, and thus the safety of your financial accounts can be at risk.

Financial Literacy Charities

This may all sound a bit overwhelming, but you do not have to figure this all out on your own. There are organizations called financial literacy charities that were created to help people like you better understand money and debt. These organizations know that once you understand the basics and have achieved financial literacy, you will be better equipped to make important financial decisions on your own.

If you are a sailor or a family member of a sailor, then you should look into the new MyNavy Financial Literacy app. This app was created just for sailors and their families to achieve financial literacy. Because so many Americans live paycheck to paycheck, the Navy decided to create this app in order to help sailors and their families maintain all aspects in their careers and lives. This app is just a part of a larger program — called Sailor 2025 — to empower sailors.

The Motivation for Budgeting on Low Income

Budgeting can be hard, especially budgeting on low income. If you aren’t very organized, good at math, or patient, then making a budget can be very time-consuming and tedious. On the positive side, once you have made one or two budgets, it will be much easier for you to make your next budget. Over time, once you have your own system in place, budgeting will get easier and easier. Plus, once you have your goals set and your own budgeting method down, it may be as easy as plug and chug.

If you have a low income, then making a budget is very important. It is essential — no matter what your income level is — to not live above your means. Though this is easier said than done, it is much easier done when you have a budget. If you have a better understanding of your financial situation — how much money is coming in and how much money is going out per month, then you can better plan how to spend your money in an efficient manner.

What’s Important When You Budget on Low Income

Budgeting is all about organization and prioritization. In order to efficiently make a budget on low income, organization is key. I personally like to use Excel for my own personal budget. Excel has rows and columns, which can make your budget more comprehensible just because it is visually more aesthetically pleasing. Plus, Excel will do all of your calculations for you, reducing room for error. Prioritization is essential in a budget on low income because it is important to understand that some things are necessary to live and some things are just nice to live with. If your goal is to spend less or save more, then it is necessary to be able to prioritize your spending, so that you can determine what it is okay to live without — and thus take off of your budget.

How to Negotiate Your Bills

While it is important to be realistic when making your budget, you should still know that you have many options and are not confined to just one path. There are some fixed expenses you have every month, but some fixed expenses may be more variable than you think. It is possible to negotiate some of your current bills.

If one of your goals when creating your budget on low income is to decrease expenses, then there are many different ways you can do that. The most obvious options are eating out less, decreasing the number of times per week you buy your morning coffee out — versus making coffee cheaper at home, and not spending as much money per month on entertainment — such as going to the movies, bowling, or attending sporting events. But that’s not all you can do. If you want to decrease your fixed expenses, then consider some of the following ways that you can negotiate your bills:

Cut Monthly Subscriptions

Do you have a gym membership but don’t really go to the gym? Do you have a Netflix and Hulu account but stopped using one of the services months ago when they took down your favorite show? If you are paying money every month for a service you do not use, then that is practically money in the trash. If you have memberships and subscriptions for services you don’t currently use, then consider cancelling them until you are ready to use them again.

Bundle Services

In today’s society it is hard to live without Internet. Whether you use the Internet at home for business, pleasure, or both, you probably don’t want to give up your Internet service. If you also enjoy your cable television programming — which can be expensive, then consider bundling your Internet and cable services. This will allow you to keep both services, but at a lower negotiated price. Pay less for more.

Talk with Customer Service

If you are not ready to get rid of a service yet but cannot continue to afford the service at the current price, then talk to the company’s customer service. Though their power may be limited, their job is to make you happy and give you a good image of the company. Whether this is to decrease your monthly cell phone bill or cable bill, just talking to customer service about your dissatisfaction with the price of the service could lead to a lowering of your monthly bill.

The Untold Tricks to Negotiating Your Bills

What is Debt?

Another important concept to know about when you have a low income is debt. You are probably aware of this and maybe even have some personal experience. That is no surprising since debt is something that most people encounter. But, as someone with low income, you want to have as little debt as possible and to get out of it quickly, so it would not be an additional burden.

The first step to getting out of debt is to understand what debt even is. Of course debt refers to money that you owe to another party — generally a company or lender. But what is your debt comprised of? To find out more about your personal debt, you can use many online financial education websites, that can give you invaluable information. go here. This site will help you connect and organize your accounts, so that, with this bigger picture, you can make better future financial decisions.

You have several options to get out of debt. Budgeting is a great one, but it takes time and practice. Another option is to think about a loan to get out of debt.

How to Calculate Your Debt to Income Ratio

Now that you have a better idea of what your debt means to you, you should calculate your debt to income ratio. Your debt to income ratio “looks at how much money you owe per month versus how much you earn.” Because of this, knowing your personal debt to income ratio could be very beneficial for you. Knowing this ratio can give you a better picture of how you are doing financially. While it is obvious that you should not spend more per month than you bring in per month, but knowing how much of your income automatically goes to debt can help you determine what you can spend the rest of your income on. On average, the recommendation is that your debt to income ratio is less than 43% of your total income.

How to Create an Emergency Fund

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Besides just getting by from paycheck to paycheck each month, it can be a good idea to also create an emergency fund. As you can tell from the name “emergency,” this fund can be used on anything that is unexpected. For instance, if you have a car wreck and cannot get to work without a car, then you will need a replacement vehicle. If you have an emergency fund, then you are more likely to be able to get the replacement vehicle without incurring as many immediate financial losses.

An emergency fund is also essential to helping you get back on your feet after a medical emergency. You may still need to get a personal medical loan to get you back on your feet, but if you already have an emergency fund in place, then you will not have to get as large of a loan out — which means less to pay back (with interest) in the future.

Of course, creating this fund can be difficult if you are already struggling to make ends meet. How can I put money aside when I can barely cover the fixed expenses I have? This is where budgeting comes in. If you put a small amount of money aside every two weeks, or every month, it will accumulate over time. Instead of eating out, or picking up a coffee on your way to work, pocket that money and save it for this fund.

Is it Better to Pay Off Debt or Get an Emergency Fund?

Whether or not it is better to pay off debt or get an emergency fund all depends on you and what your situation is. There are definitely pros and cons to each option. Though the two options are not mutually exclusive, it may only be possible for you to focus on one option if you are constrained with a lower income. In order to determine which option is better for you, you should weigh all of your options. Do you want to get out of your debt quicker and do not have to think about it anymore? Or do you want to have some money on the side in case something unexpected happens? Maybe you can even do both if you learn how to budget on low income efficiently.

Getting a Loan to Get Out of Debt

If you decide that you want to pay off your debt, but your income is low, you may consider a loan. Yes, loan is another type of debt, but there are some benefits of getting a loan to get out of debtcompared to struggling to pay it off. You could get one of a consumer loan — such as a personal loan —  in order to decrease your debt and increase your credit. This may surprise you, since you typically acquire debt by getting a loan, such as a student loan, but getting a loan can improve your credit. It is even possible to get a loan with bad credit, though a loan based on income will determine how good — or bad — your interest rate will be. Getting a loan can be done in 3 simple steps, so it is easy to see your options.


It can be difficult to budget on low income, but there are many resources available to help get you started. Whether your goal for making a budget on low income is to decrease your overall debt or to save up for your future, it is possible to budget on any income, even to budget on low income. No matter what your financial situation is, you have options. Now it is just time for you to take control of your life and financial situation.

How to Use Facebook Messenger P2P Payments

Facebook Messenger P2P Payments are part of the increasing need where millennials are leveraging mobile devices in order to make small payments to each other. Facebook now brings person-to-person payments to its Messenger application.

What Are P2P Payments?

If you want to get technical, every payment can be a P2P payment since every payment involves two parties where one person pays another. However, P2P payments have been popular due to apps such as PayPal, Venmo, and Square Cash. Social networks like Snapchat and Facebook have also gotten into this, along with traditional financial players.

P2P payments work by a person creating an account with a P2P solution and linking up a card so they are set to go. The next time you want to borrow $20 from a friend or split a tab, you can do so by transferring funds in just a click.

Statistic: Value of mobile peer to peer payments in the United States from 2013 to 2018 (in U.S. billion dollars) | Statista

How to Pay Friends with Facebook Messenger P2P Payments

Following the instructions is easy to set up your preferred payment method and to start sending money to your friends through Facebook Messenger P2P Payments. Paying through Facebook Messenger is pretty straightforward.

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Add a Payment Method

There are several different payment method options for Facebook

as a whole but only a U.S. debit card will work for Facebook payments currently. PayPal and credit cards can be added later. Both you and your friend you want to send the money to must have a Facebook account, live in the U.S., be 18 years old, have a MasterCard or Visa debit card, have your preferred currency set to U.S. dollars, and not be disabled form sending or receiving money on Facebook.

There are two ways to add a payment method, either by using the mobile app or on the computer.

If you are on the mobile app, tap on the three horizontal lines in the bottom menu. Select Settings then select Payment Settings from the menu. Tap on New Credit or Debit Card to add your card details. You can also optionally add a PIN that you enter when you want to send money. In that way, you can review the transaction before it’s sent. This provides more security.

If you are on the computer, the process is similar. You will want to click on Settings from the dropdown menu and then click Payments. From there, click Account Settings and Add Payment Method. Enter in your card details and click Save. Once you have added your payment method, you will see it listed when you click on Payment Methods.

Open a Chat and Tap Payments

Once you have added a payment method, it’s easy to send money to a friend securely and safely through the Messenger app or on your desktop when you are logged in to Payments won’t be stored by Facebook and will go straight to the recipient’s bank account associated with their own debit card. You won’t be charged a fee for either sending or receiving money. Money is sent right away but it can take three to five business days before the payment will show up in your friend’s bank account.

Mobile Device

If you are on a mobile device, open the Facebook Messenger app and open a chat with the person you want to pay. You can either open an existing chat or you can use the compose button and type in your friend’s name. Tap the blue plus sign button that shows in the menu at the bottom of the screen. Then tap Payments. Enter the amount you want to pay. You can add a note about what it’s for and then tap Pay.

If you are on then open a new or existing chat with the friend you want to pay with the messenger button. Click on the dollar sign in the bottom menu in the chat box. Enter the amount you want to pay and your optional note and click Pay.

If you make a mistake and send the wrong amount, you don’t have any time to undo it. Instead, there are two options to fix the mistake. If the recipient didn’t accept the payment yet, send a message asking them to decline it. Payment is automatically canceled if the recipient doesn’t accept it within seven days of being sent. If the recipient has accepted the payment, message him or her and ask to have them send the difference or sum back to you.

Prevent mistakes with payments by adding a PIN and leaving it turned on. The PIN feature can be used from the mobile app and isn’t available on the web version.

Request or Send Money to Multiple Friends

You can send payments to individual friends but you can also make it possible for multiple members of a Facebook group. You will receive a chat request to make a payment if a group member requests payment from you or other members. If you are the group member that is handling the payment, you can send your request for payment to everyone in the group by opening the group chat or starting a new one and following the same instructions for sending money to individual friends.

Before you enter the amount requested for payment, you will be shown a list of the group members who are part of the group. If you only want to include specific friends in the payment, just add a checkmark beside those friends. You can include yourself if you are chipping in to the pay the same amount as everyone else in the group. Facebook also lets you decide whether you want to enter a specific amount request to everyone or a total sum amount that will then be divided amongst everyone. Once you have made the request, the group chat will display the names of those who have already made the payments so it’s easy to keep track.

Benefits of Facebook Messenger P2P Payments

Facebook Messenger P2P Payments helps keep Facebook users on the platform and adds value. It also opens the door to promotion and loyalty capabilities for advertisers. There is already stiff competition in the payments space, which include Venmo, Snapchat, and several banks. Up until the rollout of Facebook Messenger P2P Payments, Facebook users would, for example, communicate on the site about tickets to a concert but then have to go to another site to exchange money in order to purchase the tickets. With this new feature, Facebook users can stay on the site.

Currently, the strategy is only limited to P2P payments but it can also open a door to wider payment strategies for Facebook when mobile payments are growing.

Security of Facebook Messenger P2P Payments

Facebook already processes more than one million transactions daily on the site and knows that security of P2P payments is a huge concern when it comes to digital money. To manage concerns, Facebook has highlighted the use of secure systems that will encrypt the connection between users and Facebook, as well as card information. The company says that it uses layers of hardware and software protection and the payment system is kept in a secure environment that is separate from other parts of the social network. A team of anti-fraud specialists also monitor for suspicious purchase activity in order to keep accounts safe. An option for iPhone and iPad users who want additional security involves the use of Face ID or Touch ID available on the device itself.

Ways to Keep Finances Safe on Facebook

If you are going to be using Facebook Messenger P2P payments or the social platform for managing your money, there are some tips you need to consider. A password helps keep your financial information secure. When you have a successful transaction, you will see the password or PIN options for future transactions. You always want to keep this secure. Don’t let the new functionality make it easier for hackers and scammers.

You should think about if a friend requests money out of the blue without prior discussion. A person’s messenger account can be hacked. So you want to make sure you are communicating with the right person and they should know when to expect payment. Remember to not share personal details with anyone you don’t know. When you want to exchange personal information with a trusted friend, use a different platform or app so information can’t be compromised by any single website or app.

Advantages of Using P2P Payments

The main advantage of using P2P payments is that they are easy to use, convenient, and quick. Transferring funds from one person to another can be done with just a click of a button. Another advantage is the cost involved. Unlike many other payment solutions, P2P payments are between two parties. This means you don’t have to pay for expensive processing, service, or transaction fees. Many solutions don’t even charge users when they receive the money. For the most part, payments are secure since they are encrypted and there are fraud monitoring capabilities. Man platforms are also beginning to use extra security features. They will send notifications for every transaction so it’s easy to stay on top of any fraud.

Risks of Using P2P Payments

Even with so many advantages, there are still risks associated with using P2P payments. Refunds can be difficult and possibly nonexistent since there isn’t a middleman involved. Even if payments are immediate, transactions can still take up to three business days to show up in the account. There can be a lot of human error involved, such as sending money to the wrong email address. The biggest concern with P2P payments is with fraud and security. While P2P payments are secured, this doesn’t mean that they are infallible. If companies aren’t taking the right precautions against fraud, they will be charged with fines. Companies do need to stay ahead of fraudsters but there are still some risks. If you have your bank account connected to your account, instead of just a credit card, then you could be putting your personal data in danger.

Why Use Mobile Payments?

Mobile payments are some of the most convenient ways to pay. Especially since smartphones are owned by a large percentage of Americans and seem to always be in reach. Mobile payments serve as a natural extension of daily tasks. They are already done on a smartphone, from updating social media accounts to checking the weather. If you put payments in your hand as well, it’s even more convenient than before.

Mobile payments will allow fully digitized financial transactions. Since consumer payments are an important part of the household budgeting process, digital wallets can integrate easily with mobile apps and software so people can see what they are spending and how often. Mobile payments are fast. Searching for cash and waiting for a chip card transaction aren’t a problem when it comes to mobile payments. Consumers just present the mobile device, it authenticates the transaction, and they go on their way. This can create an even more user-friendly experience for consumers and can help expedite business transactions.

How Mobile Apps Can Help You Save Money

If you are struggling to save and need a loan to get out of debt, there can be money-saving apps as well as personal finance sites to help. Getting started with your savings goals can be difficult at first. So it helps to have all the resources you need.

Money savings apps use the power of technology to effortlessly save and invest. Apps are available through Android and iPhone. They help shift your behavior to help you save more, even if this feels impossible. This allows you to manage money more efficiently, so you don’t need a loan for buying what you need. In order to find the right app for you, take a look at the platform and the costs. You’ll see how these apps can help you meet your financial goals. Some examples of apps are below.


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Since your credit score and creditworthiness impact many factors in your life, including interest rates and even where you can live if you want to rent, you want an app that can help you track your score. The CreditKarma app provides you with credit score data from two of the major credit reporting agencies. It will offer advice on ways to raise your score so you can improve your chances of getting a simple credit card or even loans for car repairs and medical bills.


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Joy can help you understand the reasons why you spend money and help you focus on making a happier purchase. The app is a money coach app and it won’t guilt you when you make an impulse purchase. Instead, the coach will help you track your transactions. You’ll also set savings goals to help align with your finances and personal lifestyle. It is geared toward finance management but can also help you lower interest rates and pay off debt.


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If budgeting is new to you then EveryDollar can help you get started on the right foot. This is a personal finance app that will allow you to create budgets in eight different categories, including savings, housing, lifestyle, debt, insurance, and transportation. It works by having you enter your monthly income and how much you want to spend. Then you start to balance the budget for each category, You’ll cut down on cats, pay off any loans faster, and most importantly save money.


Facebook Messenger P2P Payments creates another space to easily send money through a mobile device. The process is simple, whether you are sending money to a friend through the online app or through the desktop site. There is plenty of different security in place to give you confidence that your payments are secure. There are many advantages to using P2P payments, as well as mobile payments, but there are also some risks involved.

As always, it’s important to use caution. Don’t just share information with anyone through an app. Also, always keep passwords secure. While Facebook Messenger P2P payments can make payments to others even easier, there are also many mobile apps that will allow you to meet your financial and savings goals.

Does a Debt Consolidation Loan Hurt Your Credit Score?

If you are considering debt consolidation using a loan then you need to consider the question of does a debt consolidation loan hurt your credit score? Debt consolidation can be a good way to help you manage your debt and can make it easier to pay down the debt process. Depending on how you go through the process of debt consolidation, a loan can have an impact on your credit score. It can help your credit score in some ways and in other ways it can hurt your credit score.

What Is Debt Consolidation?

In order to answer the question of does a debt consolidation loan hurt your credit score, it helps to know what bill consolidation financing is. Debt consolidation can help you get control of your money. During the process, you merge different bills into one debt you pay off with one monthly payment. You can do this using a debt management company or by getting a loan to get out of debt.  Debt consolidation can work for credit cards with high interest.

Pros of Debt Consolidation

One of the main advantages of going through the process of debt consolidation is being able to handle your bills. First, try to negotiate your bills down as much as possible. Yes, that’s right it just takes calling and asking sometimes.

It helps to know the advantages of debt consolidation so you know if the risk of using debt consolidation is worth it to you. You get to merge all your debts into one larger debt.

If you are feeling overwhelmed about your debt then debt consolidating can make it easier to manage. One payment can be much easier to manage than a bunch of little ones. It can also improve your credit as you start to go through the process. As long as you are making consistent monthly payments, you decrease your debt and this will decrease your debt-to-income ratio as well.

Cons of Debt Consolidation

The biggest con of debt consolidation is the interest rate. You can have a high interest rate on any loan you get, especially if you have bad credit. However, once you have locked in an interest rate, it won’t change as long as it’s a fixed rate. Consolidating debt won’t shorten the repayment in any way.

Unless you close your credit cards, they will still be available to use and you can increase your debt while paying the consolidation loan. This can be dangerous so you have to change habits in order for it to not be a problem.

How Does a Debt Consolidation Loan Hurt Your Credit Score?Credit Score Factors

Determining how can a debt consolidation loan hurt your credit score will depend on various options you choose. When you choose a loan or a credit card then you are applying for new credit, which will mean a hard inquiry on your credit report. Anytime this happens, the score can suffer. Before you start a debt consolidation plan, check your score. If you close down your credit cards in the process of paying down a loan then it can also hurt your score.

How Does a Debt Consolidation Loan Help Your Credit Score?

While it initially seems the result is that a debt consolidation loan hurts your credit score, adding new credit or a loan will cause your utilization ratio to go up and this could help you score. For this to work, you will need to leave your credit cards alone after you pay them off.

How to Prevent a Debt Consolidation Loan from Hurting Credit

If you are considering debt consolidation then your credit isn’t the best shape. If your credit score is already in bad shape then the answer to does a debt consolidation loan hurt your credit score won’t really matter as much. When you don’t want a debt consolidation loan to hurt your credit then it’s time to become aware of all your choices.

The higher the amount of debt, the greater the impact on the credit score. Even if you see a slip in your credit score, chances are your credit score is low enough that it won’t make much of an impact. If you are considering debt relief then be sure to arm yourself with information.

Smart Money Tip!

Remember that a big part of your credit score is your payment history. If you want to prevent a debt consolidation loan from hurting your credit then be sure to make your payments on time every month, including your new consolidation loan.

Process of Debt Consolidation

In order to be successful and not have a debt consolidation loan hurt your credit score, it helps to know the process.

Know Your Goal:

When you start to consider consolidation, there are some things you need to know because you do not want to have a debt consolidation loan hurt your credit score. The most obvious goal is to get out of debt but you may also have the goal to prevent debt consolidation from hurting your credit report. You should have long and short-range goals.

A long-term goal can be able to save for retirement. A short-term goal can be to begin saving money. When you consolidate your debt, it gives you the freedom to start to think about these goals. You also want to make sure that consolidating your debt doesn’t stand in the way of your goals.

Gather Your Debts:

You need to gather information about your debts so you can know the gravity of the situation. You can’t start to understand the debt problem until you know how deep you are in. Check with your credit card companies and other loan companies to know the pay off amount. It could be different than you think.

Don’t stop paying debts just because you are considering consolidation. You still need to continue to pay off your debts. If you aren’t paying, this can hurt your credit score and give you additional fees. You also need to gather up your debts so that you know how much the loan should be, should you choose to go with that option.

Look at Your Assets:

This is a step that many people overlook. Assets can be your home and vehicles you have. You can also consider other valuables you have. This can include investments, savings, and retirement plans. Assets can make a difference. Some companies that help with debt management will want you to use assets to pay off your debts. This may not be the best idea. Remember your goals about how paying off debt can be a short-term goal and saving for retirement is a long-term goal. Protecting assets can be a good way to also protect your financial future.

Understand Your Credit Score: In order to start the process, you should have an idea of your credit score. Your credit score can impact the interest rate you get on a debt consolidation loan. A lower credit score can give you a higher interest rate, which can result in having a debt consolidation loan hurt your credit score.

Look at Your Budget:

Once you understand your debt, you also need to understand your budget. It helps to know how much you need to pay off your debt. If you aren’t able to pay off all your debt before the process then you may not be able to pay off the amount of the debt consolidation loan.

Know Your Options:

There may be a few debt consolidation options available to you. Some of the options may not make sense for you but it’s important to know these options are available. A debt consolidation loan can be used to pay off all your debt and then you are responsible for paying that one payment. If you own a home, you can also consider a home equity loan.

This is a secured loan since you are using your home as collateral. These loans may have a lower interest rate but you do risk your home if you aren’t paying. A balance transfer may also be another option available to you. This also requires you to have a new credit card. You can transfer the balance and pay it off with a lower interest rate. You can also use a debt settlement company with an expert in debt consolidation to help you. The expert will come up with a plan for you that is tailored for your specific situation.

You can find credible lenders here, on Loanry. All of the lenders we connect you to are selected by our partner Fiona, so Loanry is a no scammers zone. You can shop here safely and if you want to get offers from lenders, put in your information here:

Using a Personal Loan for Debt Consolidation

A personal loan is an unsecured loan that allows you to you borrow money from a lender and you promise to pay the money back in regular monthly payments. You can get a personal loan from a credit union or a bank. The interest rate will depend on your credit score and the lender’s determination of your application.

You can use a personal loan to consolidate debt for a lower interest rate. This can be an ideal situation when it comes to debt consolidation. When searching for a personal loan, you want to choose the best one for you with the lowest interest rate. The interest rate can make a big difference in your monthly payment so you can pay it back and not have a debt consolidation loan hurt your credit score. Interest rates will translate to the amount of money you pay for the loan since interest is what the lender charges for you to borrow the money. This is how a lender makes money.

Can You Get a Debt Consolidation Loan with Bad Credit?

While the answer to does a debt consolidation loan hurt your credit score may be no, it can be harder to get a loan with bad credit. While it may be harder to get a loan, debt consolidation for poor credit can still be an option. Many modern lenders can give you a debt consolidation loan online and you can get approved in a very short period of time.

You can start to compare different consolidation lenders online so you can find the right one for you. There are some alternatives that you should be aware of. Payday lenders may not be looking out for your best interest. Some can give you decent terms but others will have interest rates that are extremely high.

What Is Debt Settlement?

Debt settlement can also be another option for consolidating debt. Many times, creditors can be willing to negotiate a settlement. When you negotiate a lower debt, both the creditor and you agree to the terms. There is a catch. While the negotiating is happening and you are only making partial payments, you are aren’t paying off the full debt. There is the potential to negatively impact your credit score. Once the debt is paid, your credit can recover a little. If you already have bad credit then there may not be an impact.

There isn’t a clear answer for if you should go with debt settlement or a personal loan and it will depend on your situation. A personal loan can be a good way to consolidate debt, especially if you can get a lower interest rate. However, if you have poor credit then it can be harder for you to find a lender that will give you the money you need.

You may only be able to borrow half of what you need and this doesn’t put you in the best position. There are some advantages of debt settlement. If you are able to get creditors to agree to a settlement then you can pay off a portion of your debt. The settlement can mean that the debt is removed from your credit record faster. Be aware that debt settlement can come with fees.

Should You Consolidate?

The key to debt consolidation is to avoid taking on new debt. If you are borrowing money and paying off your credit cards but still charging them up, then you can be in worse shape than before. Think about your individual situation so you know how the process can affect your payments and your specific debt. Taking steps to consolidate debt can be the right choice if you are drowning in debt and you don’t have any end in sight.

If you feel that you can’t get your bills paid each month because you can only afford the minimum payment then you may also want to consider consolidating. If you don’t want to deal with multiple payments each month and want an easier way to settle your bills then you may also want to consider consolidating. You will have to decide which steps to address debt are the right choices for you. There are many different ways to access debt consolidation.

Understanding Different Kinds of Debt

Understanding debt means recognizing the different forms and the various roles it can play. There is a thing as too much debt. While debt-free living is a nice concept, it’s not very common. Debt can be a tool that is useful. Understanding the different types of debt can be the first step toward determining how to pay it off.


For many people, taking on a mortgage is the largest debt they will experience. However, homeownership is often encouraged. During the Great Depression, the idea of a 30-year mortgage became the norm to allow more people to purchase a home. Mortgages are the kind of debt that are most often refinanced.

Auto Loans

Vehicle payments aren’t the same as buying a home but they do have a few things in common. There are potential downsides of auto financing but it can be necessary to have a car. The secret to making an auto loan good debt instead of bad is to do your homework before you start looking. Pre-approved financing can give you more flexibility and some time to think before you commit.

Business Debt

This is a riskier type of debt than an auto loan or mortgage. With cars and homes, there are different calculations you can use to determine whether you are getting a good rate or choosing the right model or location. There is still an element of risk but it doesn’t compare to business risk.

Credit Cards

Credit cards can be the most problematic type of debt. The freedom that credit cards give means it’s too easy to buy on impulse or commit to spending beyond your means. Credit cards are designed to profit the issuing organization. Credit cards offer more risk than an auto or home loan. Many people are more likely to let a credit card payment slide than a home or vehicle payment.

The interest rate is much higher on credit cards as well. However, there are plenty of positives of credit card use. Many have fraud protection and can provide a detailed statement at the end of the month to see where your money is going. Some are also good at using the points and miles to their advantage. However, there are plenty of dangers you need to be aware of.

When you are trying to answer the question of does a debt consolidation loan hurt your credit score, you need to consider your unique situation. Debt consolidation can help your credit score but it may also hurt your credit score if you aren’t careful with the process. There are different ways to consolidate your debt, including a debt consolidation loan. It helps to know what kind of debt you have in order to understand if it is good or bad. By going through the process correctly, you can prevent a debt consolidation loan from hurting your credit score.

7 Careful Steps To Consolidate Debt Without Tripping

Finding yourself in more debt than you can handle is a scary place. I am sure many of you reading this post can relate to the feeling of complete despair when it comes to your bills. You have more bills coming in than you have money to pay them. When you get to this place, you feel lost. You feel like you have no where to turn.

I am here to tell you that you have options. There is something you can do to take control of your debt. Not only am I going to explain how to get out of debt, but I will list the steps to consolidate debt. The key is for you to take control of your finances. Recognizing that you are at a point where you feel like you have no control is an important step to gaining control. Continue reading to find out how to get a consolidation loan.

Debt Consolidation Explained

I have found that the best way to feel comfortable with something is to fully understand it. I want to define debt consolidation for you. That way, we’ll make sure you know what it means. Then as you move through this post, you will read the steps to consolidate debt. considers debt consolidation to be a strategic way to address your finances.

It is you taking control of what is happening with your money. Prior to debt consolidation, you may feel out of control. This is the opportunity for you to regain control. During debt consolidation, you merge many different bills into one debt that you pay off with one monthly payment. You can do this by applying for a loan to get out of debt or using a debt management company. You should know that a debt management company charges fees for their services. It’s important to know you can do this on your own without their extra fees!

Debt consolidation works well for credit cards with high interest. When it comes to high interest credit cards, you often find yourself in a terrible cycle of only paying the minimum. Consider this, you owe $5,000 on your credit card. It has a 20 percent interest rate. You can only pay the minimum amount on your card, which is probably around $300, give or take.

That only brings your balance down to $4,700 which is hit with another finance charge. If this cycle continues, you are only making a small dent in the money you owe. Now, imagine this is happening with multiple credit cards. You are never truly able to get in front of the debt. You are always feeling behind. Sound familiar?

Step 1 – Know Your Goal

“Winning at money is 80 percent behavior and 20 percent head knowledge. What to do isn’t the problem; doing it is. Most of us know what to do, but we just don’t do it. If I can control the guy in the mirror, I can be skinny and rich.”
― Dave Ramsey, The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

When you begin to consider consolidation, there are some things that you should do. There are smart steps to consolidate debt. The first step is to understand your goals. The most obvious goal may be to get out of debt. Or, maybe you will say to stop making so many payments that do not get you anywhere. Now is the time to really understand your financial goals.

You should create long-range and short-range goals. A long term goal may be to save towards retirement so that you are able to retire someday. Another long term goal may be to have a specific amount of money saved in ten years. A short term goal may be to begin saving money. Another short term goal may be to save for a vacation you have always wanted to take. In addition to pulling yourself out of debt, there are probably other things you would like to do, too.

Consolidating your debt can give you the freedom to begin to think about these goals. You also want to make sure that consolidating your debt will not stand in the way of your other goals. Make sure that any debt consolidation program you enter does not freeze your credit cards, or any of your assets. You might need access to them. If any of those are frozen, be sure to know how long before you are able to use them. Some programs freeze your credit cards until you are able to pay off the balance. Make sure you know all the details of any debt consolidation you consider.

Step 2 – Gather All Your Debts

As part of your steps to consolidate debt, you must gather all the information about your debts. Until you gather all of this information, you probably do not know the gravity of the situation. You cannot begin to solve your debt problem until you know how deep it is. You should contact your credit card companies and any loans you owe to get the pay off amount. That amount may not be what you think, so you should always check.

Depending on your interest rate and when you make your last payment, the pay off amount is changeable. You should make sure you are working with the most accurate numbers. Be aware of the current interest rates on loans. This could significantly impact how much money you are going to pay while in the process of paying off your debt. If you know the current interest that you are paying, then you can work to get a smilier or lower interest rate. You can use a debt consolidation calculator to help you determine these numbers.

Do not stop paying on your current debts just because you are considering debt consolidation. You still need to continue to pay your debts until you know they have been paid off by another party. If you choose to stop paying your debts, you can be hit with fees and penalties. This also negatively impacts your credit score. You should also make sure that none of your existing debtors charge a penalty, or fee, for paying off the debt early. If all of your debtors charge this fee, that can get pretty high for all of your debts.

Step 3 – Take A Look At Your Assets

One of the steps to consolidate debt that many people overlook is reviewing your assets. Your assets could be your home and any vehicles you have. You may have other valuables that could be considered an asset. All of your savings, investments and retirement plans are also considered assets. Make sure you list them when looking at your assets.

When you are considering which debt relief strategy to use, applying for a loan or a debt management company, your assets may make a difference. Some debt management companies may encourage you to use your assets to pay off your debts. You could sell some of them to make the money to pay your debts. This is not always the best idea. Keep in mind that paying off your debt is a short term goal, but saving for retirement is a long term goal. Protecting your assets may be a good way to protect your financial future.

Step 4 – Understand Your Credit Rating

It is always important to understand your credit score before you take steps to consolidate debt. The reason is your credit score can impact the interest rate you receive on any type of loan that you want. A low credit score will cause a higher interest rate. You may ultimately pay more to pay off your debts. To illustrate my point, I will give you an example.

If you have a good credit score of 650 or higher, you can get an interest rate of around 15 to 16 percent. Once your credit score begins to drop to 640, which is only a 10 point difference, the interest rate goes up to 20 percent. That is a huge jump! Say you have a debt of $5,000 and interest of 15 percent, you end up paying $750 in interest. When that percentage jumps up to 20 percent, you are now paying $1,000 in interest. That is a large increase and it feels like it takes forever to pay off that amount of debt.

Once you are in this position, your debt has already been impacted and it is hard to correct quickly. You can make positive impacts by reducing your debt as much as possible and making regular monthly payments on time. It takes consistent work, but it is possible.

Step 5 – Look At Your Budget

Now that you have an understanding of your debt, the next steps to consolidate debt are to understand your budget. It is great that you know how much you have to pay in debt. It is just an important to understand how much money you have to pay that debt. If you cannot pay all of your debt before debt consolidation, you may not be able to pay the debt consolidation amount. It is important to look at what you can afford to pay.

For the moment, you should put all of debts aside that you plan to consolidate and look at all of your other expenses. Make sure you use a budget application to track all of them.

Smart Money Tip!

After you have listed all of your debts, you should then list all of your income. You should also be clear about the source of your income and if it is a regular source of income. If you are self employed, you may not have regular income and that is important to note. You should also list any savings that you have. It is important to know if you are willing to dip into your savings accounts to pay off your debts.

Step 6 – Understand Your Options

When you are taking steps to consolidate debt, there are a few consolidation options available to you. Even though some of these options may not make the most sense for you, it is important to know they are available to you. As a result, I am going to briefly outline them for you.

There is a debt consolidation loan, which is an unsecured loan that you borrow from a lender to pay off all of your debts. You would determine the pay off amount of all of your debts and apply for a loan for that amount. When you are approved, the lender gives you the money. You are responsible for sending the payments to the debtors to pay off those loans. You then have one debt that you pay every month. This amount does not change providing you have a fixed interest loan.

If you own a home, a home equity loan may also be an option for you. This is a secured loan, because your home is collateral. These loans tend to be at a lower interest rate. You are, however, risking your home. If you do not pay back the loan, you could risk losing your house. You want to make sure if you go this route that you can pay back the loan timely. You do not want to risk losing your home.

A balance transfer may also be an option for you, particularly if you have a lower amount of debt. This does require you to open a new credit card. You can transfer the balances of other credit cards to that card and pay it off at 0 percent interest. Ultimately, this allows you to pay less money in the long term. You want to ensure the credit card allows you to transfer balances and has 0 percent interest on balance transfers. You also should verify that you can transfer your existing balances to the new card.

Some cards have limitations on what you can transfer, so you want to ensure you can transfer the old balances. Another thing to consider is there is usually a time limit for paying off the balance transfer. You may have 18 months to pay off the balance at 0 percent interest. Be aware that if you have no paid off the balance within the 18 months, you will be charged interest all the way back to the date of transfer. Make sure you read the fine print and understand the terms to which you are agreeing.

Another major option available to you is a debt settlement company. This includes an expert in debt consolidation to help you. You receive a debt counselor to create a debt management plan with you. This debt counselor helps you to put together a plan that is specific to you and helping you in your particular situation. The credit counselor takes on the burden of paying off all your debts. They will contact all of the companies and ensure all of your debts are paid, so you do not have to handle that on your own. You want to make sure you pick a company in which you feel comfortable working. Keep in mind that debt management companies charge fees to handle your debt management plan. You want to make sure that you are aware of the fees up front before you agree to working with the company.

Step 7 – Decide If You Need A Debt Manager


Using a debt settlement company or manager may sound like a great way to do. They handle many of the steps to consolidate debt for you. You do not have to reach out to your creditors because they do it all for you. If you are sure that you do not want to get a personal loan and you feel you could benefit from credit counseling, then debt consolidation may be for you. If you do not mind paying the fees, then it could be the proper route. In reality, you must decide if a debt manager is the best decision for you based on your individual circumstances. Maybe the thought of dealing with all of those lenders gives you anxiety. Then paying the fee is worth it to you because it takes away that burden.

Is Loan to Consolidate Debt Right For Me?

I know you are not going to like this answer, but it depends. Taking steps to consolidate debt may be the right think for you if you are drowning in debt that has no end in sight. If you feel like you cannot get your bills paid per month because all you can afford is the minimum payment, then you should consider consolidation. If you just do not feel like dealing with three different payments per month and you want a simplified way to handle your bills, maybe you should not consider consolidating.

You have to decide for yourself if taking steps to consolidate debt is right for you. There are many different ways to address debt consolidation, so maybe if you should consolidate your debt is not the right question. Maybe you really are asking how should you consolidate your debt. Arming yourself with all of the information is the best way to answer this question. When you know all of the options available to you, you are better able to answer that question.

Pros To Debt Consolidation

One of the benefits to taking steps to consolidate debt is you finally can stop drowning in bills. You merge everything into one monthly bill. You do not have to apply for a loan. There are other ways to consolidate debt without needing a loan. The biggest advantage to debt consolidation is probably the most obvious, it allows you to merge all of your debts together into one larger debt. This gives you the opportunity to focus on one debt and one payment instead of multiple ones.

One payment is so much easier to manage than multiple different ones. It is easy to be in control. It is easy for your brain to wrap around one payment and the total amount getting smaller. Debt consolidation can improve your credit as you begin to work away at it. As long as you are making consistent monthly payments, you are decreasing your debt with every payment. This also decreases your debt to income ratio. This is the amount of debt you have compared to your income.

Debt consolidation can help you to feel empowered since you are taking control. You are able to make more than just the minimum payment. Your payment amount will not change because you have used your credit card. This is a static payment, so you always know how much you need to pay. This also may be room for you to make more payments in one month.

Cons To Debt Consolidation

As with anything, there can also be some negatives to taking steps to consolidate debt. I want you to have all the information, so I am going to share the potential downside to consolidating your debt. The biggest negative is the interest rate. You may end up with a high interest rate on any loan you get.

This is especially true if you have poor credit. However, once you have locked in an interest rate, as long as you have a fixed rate loan, that amount will not change. It is still going to take you a long time to pay off your debt. Consolidating your debt does not shorten the repayment in any way. However, with each payment, you are decreasing your debt. This may not be true prior to consolidation.

Unless you close your credit card accounts, they are still available for you to use. There is a high chance you may increase your credit card debt again while still paying the consolidation loan. This is a dangerous place to be. You are just piling debt on top of debt. You have to change your habits for this not to occur again. This means you have to truly take control of your spending. Credit counseling may be a good idea so that you can gain an understanding of how credit works.

Will Debt Consolidation Hurt My Credit?

Chances are if you are considering debt consolidation, you credit is not in the best shape. I am going to guess that you have a lot of debt that you are having a difficult time paying. The higher your amount of debt, the greater the impact is on your credit. Your debt to income ratio is most likely high, which is also harmful to your credit score. Typically, consolidating your debt MAY ultimately improve your credit. You may seem a slight dip in your credit score as you are in the process of obtaining a loan, or working through consolidation. Chances are, your credit score is already low enough that a slight dip does not make much impact.

On the other hand, taking steps to consolidate debt may improve your credit score. Essentially, you are paying off all of your debts and creating one larger debt for yourself. This gets those other debts paid off quickly, which can improve your credit rating. By focusing on just one payment, you are be positioned to pay it on time. Making timely payments and not missing any months can help improve your credit score.


After reading all of the information above about steps to consolidate debt, if you still are not sure, maybe you should talk to a financial advisor. Taking on more debt, even to pay off other debts, is not something that should be taken lightly. If you are not sure if this is right for you, you should not rush into it. I have outlined all the steps to consolidate debt. You need to make sure you can afford the consolidated payment amount.

It is reasonable to think that combining all your bills into one debt decreases the amount you pay each month. But, that is not always the case. You need to first understand your budget and how much money you can afford to pay each month. You must then understand how much your total debt is. Then you can take a look at what kind of interest rate you can get for a loan in the amount you need. Can you afford to pay the every month for the length of the loan?

Will a lender give you the money you need to pay off all your debts? If the answer is no to either of those questions, this process is not for you. Paying off only a portion of your debt is dangerous because you now have a higher monthly payment for the consolidated debt plus all the leftover debt. If you cannot afford to pay back the loan or the interest is higher…DO NOT DO IT. You will just put yourself in a worse financial position by obtaining a loan you cannot afford. That will be more stressful and negatively impact your credit. Take all of your options into serious consideration before moving forward.