Household debt in the US is at a record $14.6 trillion. As the cost of living soars, more people are finding themselves stuck in the monetary trap. So how do you get out of debt?

One way is with a loan, although you need to plan it carefully. Read on as we tell you how to consolidate debt with a personal loan. 

How to Consolidate Debt

When you get a loan to consolidate your debt, it can be used to pay off several outstanding balances. If you manage to pay them all off, then you only have one manageable monthly sum to pay back. 

Credit cards have very high APRs. This makes them expensive for long-term borrowing. Store cards operate in the same way and despite upfront discounts on spending, can also drag you into debt. 

You may have taken out personal loans in the past for cars, holidays, or home improvement. These may also require payment. Finally, if you have been operating in an overdraft they also charge high-interest rates. 

1. Work Out What You Owe

Before you even apply for the loan, you should work out what you owe. This is a great money management technique to get into regardless. It lets you see the amount you need to get rid of debt. 

Make a list of all the current debts you have. Start by putting the most urgent ones to the top.

After this, rank them by which are charging the most interest. This is the order in which you should pay off the debt. 

2. Shop Around

Don’t just go with the first loan offers you find. Check what the interest rates are and get the best deal, followed by the repayment terms. This link has advice on how to find the best personal loans for your needs. 

3. Pay Off Your Debt

This part should be simple, but very often turns out problematic. When you have been living in debt for a long time and suddenly get a lump sum it is easy to live a little. Don’t do this, and instead pay off debts immediately. 

Start from the top of your list and work your way down. If your loan only covers part of your debt, then make sure you pay these urgent ones first. Any money you save each week that was going towards your cleared debts should be put towards extra payments on the remaining ones.

4. Pay Back the Loan

Factor your loan installments into your monthly outgoings. Make sure you pay it back on time to rebuild your credit history. Close any credit or store cards so that you are not tempted to spend on them again. 

Staying Out of Debt

Once you know how to consolidate debt, create a plan and shop for the best loans. When you have paid it off, you must stay out of debt once more. You may not be able to qualify for a second loan. 

This article is one of many to help your finances. From loans to mortgages, we can manage your money in the coming year.