Debt Consolidation in Rhode Island: Repay Debts and Save on Interests

Rhode Island is an expensive state to stay in, with a cost of living index of 117.2 (12.59 points more than the national average), according to the World Population Review.

So, if your income is below or is at par with the minimum required wage of $30,763 to live in the state, there's a high chance you might be racking up credit card debt or other financial obligations and struggling with payments.

And, if you have more than one debt obligation to fulfill every month, you might be struggling even more, just managing to make minimum monthly payments and losing money on interest.

However, there's a way out for you to not only better manage and pay off your debts but also save as much as thousands on interest - the method is Debt Consolidation in Rhode Island.

Here we will address all the essential aspects of debt consolidation and see what it offers.

Debt Consolidation in Rhode Island - Overview

Debt consolidation is the process of paying off multiple debts by taking out a single loan, usually with more favorable payoff terms—a lower interest rate, lower monthly payment, or both.

With the new loan, your current obligations will be cleared, and you'll be responsible for repaying the new consolidated debt.

Positive effects of debt consolidation:

  • Lock in a lower interest rate
  • Reduce your monthly payment amount
  • Get out of debt sooner
  • Simplify your repayment schedule

Types of Debt You Can Consolidate

  • Credit card debt
  • Payday loans
  • Collection accounts
  • Unsecured debt
  • Medical bills
  • Utility bills

How Does Debt Consolidation Work? A Simple Illustration

Here’s a simple illustration to make it clear how debt consolidation works to save you from losing money on interest -

Loan Details Credit Card (3) Debt Consolidation Loan
Interest 28% 12%
Debt Free Date Feb 2025 Sep 2024
Monthly Payments $735 $735
Bills to be Paid Monthly 3 1
Principal Amount $15000 (5000 x 3) $15000
Interest Amount $5811 $2029
Total $20,811 $17,029

Total Amount Saved - $3,782

Should I Consolidate My Debt in Rhode Island?

Debt consolidation in Rhode Island isn't a one size fits all strategy. Like any debt management strategy, you must meet some preconditions to make consolidation worthwhile.

If you fulfill the following criteria, debt consolidation is worth considering in Rhode Island-

  • A good credit score - If you want favorable terms and a low-interest rate on your debt consolidation loan, you'll need a good credit score of 680 or higher.
  • Multiple high-interest debts - The consolidation strategy proves beneficial only when you have multiple high-interest debts to pay off. You can save money on those interest charges when you consolidate multiple debts into one with a lower interest rate.
  • A well-constructed repayment plan - To make debt consolidation a success, you need to construct and stick to a repayment plan that suits your financial situation. (Change)

When is Debt Consolidation a Bad Idea?

If the following rings true, debt consolidation is a bad idea -

  • Impulsive Spending - If you have a habit of impulsive spending, and it is why you're in debt, you need to address your spending behavior before going for consolidation. With impulsive spending, you risk falling into a debt trap even with a new consolidated low-interest loan.
  • Small debt - If you have a small debt with a not-so-high interest rate and think you can pay it off in a year or less, you won't get much out of consolidation.
  • Debt more than half of your income - If all your debt obligations combine to be more than 50% of your income, there's a high chance you'll have a hard time repaying it even with a consolidated loan with a lower interest rate.

Alternatives to Debt Consolidation in Rhode Island

In your case, if any of the above circumstances ring true, you can try these alternatives to address your debts -

Debt Settlement

You can consider debt settlement in Rhode Island as a last resort in case -

  • You have a DTI higher than 50%
  • You have a high amount of unsecured un-resolved debt.
  • You're frequently late on debt payments.
  • You have trouble making the minimum payment amounts every month.

Bankruptcy

Bankruptcy in Rhode Island is the last resort. You can consider this option in case -

  • You are overburdened with your debt without the means to pay it off.
  • You have tried other debt relief methods but failed to solve your debt problems.
  • There's a high chance you'll lose assets to your creditors since you owe a secured debt.
  • You are unemployed and without the chance of employment soon.

Debt Management Plan

You can consider a debt management plan in Rhode Island if:

  • Your unsecured debt is between 15% and 39% of your annual income.
  • You have a steady income and think you could pay off your debt within five years if you had a lower interest rate.
  • You have more debt than you can consolidate.
  • Your credit score isn't high enough to make you qualify for consolidation products, like a balance transfer credit card or a personal loan.

Debt Consolidation Option in Rhode Island

There is several options to consolidate your debts. Among these, here are three common ways to do it -

Balance Transfer Credit Card

If you qualify for a balance transfer card, you can perform a credit card debt consolidation by moving the balances from your high-interest rate credit cards to the new card.

The balance transfer cards often come with zero interest or a very low-interest rate for a promotional period of up to 18 months.

The idea is to pay your new consolidated credit card debt before the promotional period ends, or you risk racking up even more interest than you had earlier.

Benefits Downsides
Pay off your credit card debts at significantly lower interest rates and save money. You might need to pay a typical fee of 3 to 5% of the amount transferred on top of the balance.
No risk of losing assets. If you fail to pay off your new credit card debt within the promotional period, the APR will rise to the customary high percentage.
If you have a high enough credit score, it's quicker and easier to get than many other loans. A hard pull on your credit report.

Personal Loans

Suppose you can get a personal loan with a low-interest rate, enough money to pay off your debts, and a reasonable repayment period. In that case, it can be an excellent debt consolidation option in Rhode Island.

Benefits Downsides
You can get lower interest rates than credit cards in many instances. Personal loans can come with fees for origination, late payments, and prepaying early.
No need for collateral. You can qualify for low rates only if you have excellent credit - more than 660.
Loan amounts range from $1,000 to $100,000. Scams are common in the debt consolidation loan marketplace.

Home Equity

If you own your home with enough equity, have a good credit history, and want a minimal interest rate, a home equity loan is a great debt consolidation option in Rhode Island.

Benefits Downsides
Fixed rate and fixed monthly interest for home equity loans. Home is the collateral that secures the debt.
Larger loan amounts. Longer funding timelines on average.
Lower interest rates than credit cards or personal loans. Longer repayment timeline can mean higher costs overall.

DIY Or Debt Consolidation Companies in Rhode Island - Which One Is Right For You

Debt consolidation is only one among many debt relief options. Every option is helpful in its own right, but whether it works for you depends on your financial scenario.

Failure to make the right choice can worsen your debt challenges.

If you fulfill the pre-conditions of debt consolidation and are looking to use the strategy to pay off your debt, there are two ways you can do it - DIY or hire a debt consolidation company in Rhode Island.

You might prefer doing it yourself when it comes to solving financial challenges. After all, finance is a personal aspect of life, and sharing your situation with an outsider can be unsettling.

So, if you're well aware of the intricacies of your financial scenario, are sure that debt consolidation will help you, and know how to make the best out of the strategy, go for it.

But, in case you're unsure about any aspect of your finances, it's best to take the help of professionals to avoid any unforeseen negative situations.

OVLG, a debt consolidation company in Rhode Island, can help you assess your finances, find out whether debt consolidation will be right for you, and work with you through all the steps to make the strategy work its charm.

If our experts discover that consolidation may not be the right way to address your situation, they can help you choose and implement the best debt relief option for your needs.

How to Choose a Reputable Debt Consolidation Company in Rhode Island

Here are some preliminary checkpoints that you should go through to choose a reputable debt consolidation company in Rhode Island -

  • Make a list of the top ten debt consolidation companies you believe you can work with. You can visit the Better Business Bureau (BBB) website to find the top-rated companies.
  • Find out how long and how well the companies have been functioning. Read the reviews and customer testimonials.
  • Visit the websites of the debt consolidation companies and see if they are transparent with their fee structure. If you see anything about upfront fees, avoid the company.
  • Also, check which companies provide free initial counseling sessions and educational resources - these can help you play an active and effective part in your debt consolidation process. Avoid organizations that charge for the information.

After going through all the checkpoints and making the final list of companies, it's time to set up an interview.

Here are some questions you must ask, according to FTC -

  • What services do you offer? Look for a company that provides a range of services. Avoid organizations that try to sell a debt consolidation plan as your only option before they spend time analyzing your financial situation.
  • Other than helping me solve my immediate debt problem, can you help me make a plan for avoiding financial dilemmas in the future?
  • What are your fees? Is there set-up or monthly fees? Get a specific price quote in writing.
  • Will you provide me with a written agreement or contract? Read the agreement thoroughly before signing. Ensure you get all verbal promises in writing.
  • Are you authorized to provide your services in my state?
  • What qualifications do your counselors have? Are they accredited or certified by a third party? If so, which organization is it? If not, how will they be trained? Try to work with a non-affiliated organization that trains its counselors.
  • What steps would you take to keep my information (address, phone number, and financial information) confidential and secure?

Debt Consolidation in Rhode Island - Top 3 Popular Questions Answered

  1. How does debt consolidation affect your credit score?

    Ans. Any credit application usually results in a hard inquiry, which can lower your credit score by a few points for a few months. However, the overall credit effect of debt consolidation should be positive if you pay on time and avoid incurring more debt.

  2. How to choose the right debt consolidation option in Rhode Island?

    Ans. Analyze each lender's interest rates, loan terms, and fees when deciding which strategies might work for you. If possible, avoid subprime lenders who market to consumers with bad credit — these lenders charge the highest interest rates and have the most stringent loan terms.

    Even if your credit score is low, shopping around with traditional lenders is worthwhile.

    It's also critical to confirm that the lenders you're considering are legitimate.

  3. Can I use my credit card after debt consolidation?

    Ans. You can continue using your old credit cards without restrictions if you use a balance transfer. Although, you shouldn’t (as long as you don’t pay off your new debt), as you will risk falling into a debt trap again.

    However, when it comes to debt consolidation loans, in some cases. you may face credit card account closure.

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