How To Consolidate Your Debts in Idaho

Collect the Details About Your Debts

Most of us have a pretty good idea of how much money we owe people, but in order to assess whether debt consolidation makes sense, you need to have a grasp of the specific details of your debt.

To begin with, request a free copy of your credit report from each of the three credit reporting bureaus. For an additional fee, you can also purchase access to your credit score. You can use your credit report to see what your creditors have reported about your payment history and total debt. Knowing your credit score will allow you to gauge if you will qualify for certain debt relief options based upon whether you have relatively good credit, bad credit, or are somewhere in between. 

After you receive your credit report, take your time to review the document for any inaccurate reporting. Also, note whether you have any debt that doesn’t appear on your credit report (for example, a personal loan from a friend or family member). Then, collect any recent statements or bills for each of your creditors. Create a spreadsheet and insert into columns the following data for each creditor: 

• (1) the type of debt you owe (student loans, credit card debt, other unsecured or secured loans, etc.), 

• (2) the interest rate being charged, 

• (3) your monthly payment, 

• (4) your balance, and 

• (5) whether you are up-to-date on the bill. You’ll use this information to calculate your full debt load, as well as to compare the terms of any potential work-outs or loans. 

Determine Your Monthly Income

You may know your annual salary, but do you know how much money you actually have available for living expenses, savings, and debt repayments after your employer takes out money for taxes and payroll deductions? It’s not as simple as dividing by 12. This calculation is really important for setting your budget and assessing your ability to make loan repayments with a structured repayment plan. As you go through this exercise, try to be as precise as possible, but only include income that is reliable and regular. If you overestimate how much money you actually earn each month, you may end up with an unrealistic budget and, ultimately, in even more debt because the minimum payments are more than you can handle.

To calculate your monthly take-home income, find your two most recent paychecks and review them. Find the line item for “Net Pay”, which signifies your actual take-home pay. Is what you earned typical of your normal paycheck? In other words, did you earn more or less than you usually do? For example, if you had more overtime than usual or took unpaid leave, keep looking for a paycheck that is more representative or your normal one. 

Using the “Net Pay” from that paycheck, find your annual income by using the following formula:

• (i) if you’re paid weekly, multiply your “Net Pay” by 52; 

• (ii) if you’re paid bi-weekly (every other week), multiply your “Net Pay” by 26; 

• (iii) if you’re paid bi-monthly (twice a month), multiply your “Net Pay” by 24; or 

• (iv) if you’re paid monthly, multiply your “Net Pay” by 12. If you occasionally earn a bonus, commission, overtime, or other income, your annual income may actually be higher, but - again - you want to be conservative in your estimates. 

Then, divide your calculated annual income by 12 to find your actual take-home monthly income. 

Put Together Your Budget

Most people sigh at the idea of a budget, but they’re actually really important to becoming debt-free. The best way to save money is by tracking and understanding where your money goes each month. If you don’t have a handle on your spending habits, then it’s going to be really difficult to get out of the debt cycle. 

In this exercise, you are going to identify and classify your monthly expenses. Gather your last three months of credit card bills and bank statements and start mentally classifying those expenses. Go back to your debt spreadsheet and add two new columns: one for “fixed expenses” (those expenses that are steady each month, like rent, daycare, data plans, etc.) and one column for “variable expenses” (those expenses that fluctuate each month, like utilities, gas, entertainment, etc.). Add those expenses and see if you can identify any areas that you can reduce or eliminate. If so, highlight those and set a goal for yourself in the column next to it.

Now think more broadly. Are there any costs that only occasionally have to pay, like medical co-pays, oil changes, excise taxes, registration costs, etc.? Your budget still needs to account for these costs, so add them to another column and then divide that total by 12 to calculate the amount you need to set aside each month for those irregular expenses.

Lastly, add 10% to your total monthly expenses and plan to set that money aside into an emergency fund. Tally everything up, and you will have data showing how much you have been spending each month and how much you need to budget to stay afloat. 

Do the Math

The final step in this exercise is determining what, if any, money you have available to make loan payments after you’ve deducted your budget expenses. Add all of the debts that you identified in the first step to find your approximate loan amount. Since most Idaho debt consolidation loans have loan terms of either five or ten years to repay the total amount, divide your total “loan amount” by either 60 (for a five-year loan) or 120 (for a 10-year loan) to find your estimated monthly loan payment. Keep in mind that this is an estimate of your debt payments because, in order to keep things simple, we aren’t taking into consideration any interest or loan fees charges. 

Now, subtract your monthly payment from your monthly income. Does the remainder cover your monthly budget? If not, revisit your budget and see if there are any areas or expense that you can reduce or cut. If your math shows that you have enough income to cover both your budget and your estimated loan payments, then an Idaho debt consolidation loan may be a great option for you.

Review Your Idaho Debt Consolidation Options

There are a number of different ways to consolidate your debt, ranging from credit card balance transfer, home equity loans, personal loans, unsecured debt consolidation loans, and debt management plans. Your consolidation options available to you will largely hinge on your credit score, the type of debt you owe, and whether you have any collateral (or personal property) to secure a loan.

The most common way to reduce high-interest credit card debt is by transferring your credit card balance to a new line of credit. The offers for balance transfer cards usually boast a very low promotional interest rate (perhaps as low as 0%). Check the fine print and run your numbers: some balance transfer credit cards charge a transfer fee of between three and five percent, while others have such a short introductory period that you may not be able to pay off the transferred balance before the rate ends (and you may get stuck with a higher interest, variable rate).

If you’re a homeowner, you may be able to borrow against the value of your property through either a refinance of your mortgage or a home equity loan. This type of loan (a secured loan) usually offers the lowest interest rate and longest loan term (up to 30 years), but if you default, you run the risk of losing your home! The application process for mortgage refinancing and home equity loans is also complex, time-consuming, and administratively expensive: you will likely be charged for an appraisal, origination fees, legal fees, and recording fees - all of which get added to the total amount of your loan. 

If you aren’t a homeowner but you have a good credit history, you may be able to qualify for an unsecured Idaho debt consolidation loan with a low-interest rate. These types of personal loans usually charge a fixed interest rate at a lower rate than your credit card. Personal loans don’t require a lot of paperwork (you might even be able to find one online) and have a quick turn-around time. If you qualify, you can use the money to pay off different types of debt (auto loans, credit card debt, medical bills, and student loans) into a single monthly payment. However, you might be charged an origination fee, application fee, and assessed penalty fees for late payments. 

A debt management plan is another way to create a payment plan for your debt without having to take out a new loan. Instead, you work with a credit counseling agency to negotiate with your creditors and design a payoff plan that usually takes about three to five years to complete. During that time, you submit one monthly payment to your credit counseling agency, which then distributes money to your creditors based upon the payoff plan. While you are enrolled in a debt management plan, you’ll likely have to close all of your credit accounts. 

Apply for an Idaho Debt Consolidation Loan

If it looks like an Idaho debt consolidation loan or debt management plan will help you resolve your financial situation, that’s great news! Before you sit down with a lender or other financial partner, though, you may want to do some research. You can check with the Better Business Bureau for any complaints or speak to a counselor from an accredited Idaho credit counseling agency to ensure that your potential financial partner is trustworthy. Even if your research comes back clean, trust your gut if anything about the offer feels wrong, especially if your prospective lender seems aggressive or evasive. Also, before you sign anything, make sure you read all of the fine print, understand the repayment terms, and run your own calculations: you can refer back to your spreadsheet to compare the loan terms being offered to you with the terms you are already paying. If your new loan isn’t going to considerably reduce your monthly payment, you may want to keep shopping around. 

How to Stay Current with Payments After Consolidating Your Debts in Idaho

After you’ve consolidated your debt, the real challenge is finding a way to make staying on-track and on-budget fun (or, at least, not fill you with dread). We’ve listed some strategies below to help ensure that your debt consolidation is a success.

• Paying Your Debt Consistently (and Automatically): You can avoid late payments and reduce stress by making your loan payments on the same day each month. Since most lenders allow you to choose your own payment due date, you may want to stagger your loan payment due date for a few weeks after your other large bills (like rent or mortgage) are due, so that your bank account has time to recover. Then, put your loan payments on autopay in order to make sure that you stay current.

• Use A Budgeting App or Software: You can make monitoring your finances less tedious by using technology (like Mint, EveryDollar, YNAB, or Albert) to track your spending, organize your budget, and alert you when you’re nearing your limit.

• Create An Emergency Fund: Your budget should already account for it, but make sure you are setting aside about 10% of your budget into a separate “emergency” account. That way when your car breaks down or your friends elope in Vegas, you’ll have a stash for paying the mechanic or buying a wedding gift.

• Reward Yourself: Getting out of debt is hard work, but it’s helpful to remember that budgeting is not deprivation, it’s about prioritization. Set a few goals and reward yourself when you reach those milestones. For example, maybe you can double-up your incentives and treat yourself to a fancy dinner once you’ve saved $1,000 in your emergency fund (win, win!). Or, maybe allow yourself a small indulgence for each month that you stay on-budget or set aside a certain amount of money each month for a larger reward (like a vacation).

• Join A Community: Social media and the internet are full of communities dedicated to intentional spending and financial independence. Check out some Facebook groups (like the BuyNothing Project) for ideas on how to maximize your budget.