What to Do after You Consolidate Your Debts

Consolidating debt is the process of combining high-interest debts from student loans, credit cards, or car loans with a single lender. Debt consolidation may reduce your interest rate, and it could also result in a lower monthly payment on outstanding debts. But what should you do to avoid accruing more debt after you have consolidated your debt?

Here are some steps you can take to make sure you stay on the road to financial recovery.

  • Stop using the credit cards you paid off – Many people who have their debt consolidated make the mistake of continuing to spend money on their old credit cards. Doing so results in having both a debt consolidation loan to pay, plus a brand-new credit card balance. To avoid piling more debt on to what you already owe you should stop spending on those cards. We recommend storing them in a place where you will not be tempted to use them, but where they can still be accessed for emergencies.
  • Adjust your spending habits – Consolidating your debt may make it easier to pay off, but it does not necessarily address the root of your financial issue. You may need to reflect on the behavior and spending habits that got you into debt to begin with.
  • Follow the six rules of wise credit card usage – In order to maintain a good credit score it is important that you use your credit card responsibly. Here are some guidelines that can keep you in good financial health.
    • Create and stick to a budget – Review your income and monthly spending habits to create a budget that you can stick to each month.
    • Borrow only what you can afford to pay back – A $3 cup of coffee can easily become a $20 cup of coffee after interest accumulates.
    • Pay your bills on time – Missed payments can stay on your credit score for years to come so make sure you pay at least the minimum balance each month, and the full balance whenever possible.
    • Carry credit card balances responsibly – You may carry a credit card balance as long as you are making credit card payments on time each month. Missing payments will harm your score and are red flags to lenders.
    • Check your credit reports at least once each year
    • Limit the number of credit cards you carry to one or two

Financial hardships from credit card debts do not develop overnight. Instead, these financial strains are often the result of years of overspending. We recommend reviewing your income, bank accounts, and spending habits to create a budget that will allow you to pay off your debt. You may find that your spending habits were reasonable, but the loss of a job or a sudden medical expense catapulted you into dire financial straits. Whatever the reason for your financial burden, it is better to adjust your spending in the short-term in order to set yourself up for success later.

Consult an experienced bankruptcy attorney

Choosing the right debt solution can be a daunting task, but you do not have to do it alone.If you are experiencing financial hardship, contact Thomas M. Denaro, Esq. With more than 34 years of experience, Thomas M. Denaro, Esq. is prepared help you navigate the bankruptcy filing process. Call us today at (718) 863-6000 or contact us online for a free and confidential consultation with our experienced bankruptcy attorney.

Thomas M. Denaro
About the Author: Thomas Denaro
Thomas M. Denaro is an experienced bankruptcy attorney serving the Bronx and surrounding areas. He represents Bronx families in bankruptcy court, and has handled thousands of Chapter 7 and Chapter 13 cases from beginning to end.