We all make poor financial decisions from time to time. Debt consolidation is a valuable option that can help you out of a bad situation and avoid bankruptcy, but only if you take the time to prepare for the process. These tips can help you plan for obtaining debt relief so you’ll be better able to move forward and rebuild your life.
4 Tips for Debt Consolidation Preparation
1. Create an Actionable Budget
Many people who end up needing to file for bankruptcy end up in that position because their budgets were unrealistic. The budget you create should allow for payments to creditors and other regular monthly bills while leaving enough left to contribute to an emergency savings fund and a retirement investment account. Additionally, you should have something extra each month to cover infrequent expenses, such as vehicle registration, dental checkups, and auto repairs.
2. Ditch the Plastic
For the time being, accept that you can’t continue using your credit cards as freely as you have in the past. After all, this was probably a major contributing factor that led to the brink of bankruptcy.
Once your cards have been paid off, cancel all but one of them. The card you keep should be put away in a secure place and used only once a month for a small purchase. This will be enough to keep the account active and help you improve your credit rating—which is how a credit card should be used.
3. Review Your Credit Report
This is also a wise time to review your credit report and check for errors and possible charges that might be related to identity theft. Report these errors to the relevant credit bureau right away and dispute the charges with the appropriate creditors. This can help you raise your score by eliminating mistakes that dinged your credit.
4. Make Future Payments on Time
Moving forward with your debt consolidation plan, create a system for ensuring every payment is made on time. Even one late payment is enough to harm your credit score, so setting up reminders on your smartphone, computer, and calendar can help. If you feel your debts getting ahead of you, picking up a second or third source of income on a temporary basis will enable you to get back in control.
If you’re considering debt consolidation, it’s important to understand that there are many companies out there that are just eager to get your money while you’re vulnerable. The Gil Law Firm will help you choose the best option for your situation with your best interests in mind. Skilled in bankruptcy and other types of debt relief, Rafael Gil III has been helping clients in the Dothan, AL, area deal with their debt problems for almost two decades. To arrange an initial consultation, visit the firm’s website or call (334) 673-0100.