Utah is currently the tenth state with the most household debt in the US. And with the pandemic still around, debts are now increasing. These household debts include mortgages, auto loans, personal loans, etc. If you're one of those people who are having financial struggles, you're not alone. One of the wisest moves you can make right now is to consolidate your debt.

Debt consolidation is one way to make your monthly installments more streamlined for easy management and saving. If you have a good credit score, this should be what you're doing right now. Debt consolidation loans work differently than any other loan, your outstanding balance on your other loans consolidate into a single account you pay monthly.

Most debt consolidation loans have a promotional offer to give you a lower interest rate for a set period. When it's over, you'll have the regular interest rate that is higher than the initial offer. If this interests you, here's how you consolidate your loan more efficiently.

Know More About Your Debts

When consolidating your loans, the first thing you should do is to understand the repayment terms' full extent. With this, you'll know your outstanding balance for all of them. To get each loan's specifics, collect all the monthly installment rates, interest rates, and current outstanding balances. Also, categorize your debts into either secured and unsecured loans. To know more about your loans, you can again ask for a credit report to see your credit history.

Determine Your Monthly Income

To create an accurate budget, look at all your pay stubs and see if you can determine which of them is closest to your weekly income. This is to avoid having any miscalculations when it comes to budgeting. By calculating your monthly income, you can create a plan to see how much you have to pay back your loans.

However, if your income is social security, consolidating your loans is the wrong decision. It's also not a good idea if you're living off child support or alimony.

Create a Comprehensible and Accurate Budget

It's imperative to consider all of your bills when creating a budget. While specific bills have a set amount of monthly payments, some bills fluctuate every month. So, it can be hard to create an accurate plan.

To mitigate this, you can review the last 2-3 months of bank statements and create an average for each bill. Also, by looking at your bank statements, you'll notice where you're overspending.

Don't miss any expenses when creating your budget, like your annual expenses. After summing up all of your monthly expenses, subtract them from your average monthly income. Double-check it to make sure your calculations are correct.

Review the Debt Consolidating Option in Utah

After calculating your monthly income, subtracted with your monthly expenses, it's time to see all of your debt consolidation loan options in Utah. You could choose several options, like credit card balance transfer, home equity loans, unsecured debt consolidation loans, and debt management plans. If you have a good credit score, consider picking a credit card balance transfer.

Assuming it has a lower interest rate and lower monthly installments, confirm the interest rate when the promotional rate is over to make sure you canafford it. If you prefer home equity loans, be aware of the loan you're picking, especially if it has an ARM or adjustable-rate mortgages. ARMs mean that your monthly installments will fluctuate regularly, making it harder for you to stay on budget.

Pros and Cons of Debt Consolidation Loans

Debt consolidation loans can put all of your outstanding balances into a single account. This helps you create a streamlined payment without remembering all of your outstanding balances and varying interest rates.

Debt consolidation loans tend to have lower interest rates, allowing you to save more money for your monthly payments. However, the most important thing about debt consolidating loans is that it lets you avoid any credit score damage.

Utah's average credit score is 678, limiting options when looking for debt consolidation loans. But, debt consolidation loans in Utah for bad credit do exist. They still work similarly with regular consolidation loans, although they typically have a higher interest rate, especially if it's an unsecured consolidation loan.

Consumer Credit Counseling in Utah

If you aren't keen on taking on another loan to consolidate your debt, there is one option in mind that can help you, and it's consumer credit counseling. Utah has non-profit consumer credit counseling, and they help you drastically reduce your interest rates. If you pay your monthly installments on time and can at least afford their minimum monthly payment, this is a good option for you.

One of this option's main selling points is that they have terms up to 5 years. In that time, they promise to have you debt-free. However, there are also downsides when it comes to this option. Your credit report will take a hit since it's a third party, making it a little bit harder to get approved for future loans. Not only that, but their monthly payments are a little bit higher than other loan options.

Takeaway

If you think you're alone in terms of being buried in debt in Utah, you're wrong. A lot of people who are in the same situation are also looking for options to be debt-free. Debt consolidation and consumer credit counseling are just some of the ways to help you pay off your loans. However, it all comes down to discipline and money sense to get rid of your debts completely.