If you’re striving to better manage your money and pay off your debts, a debt consolidation app can help you track and manage what you owe. However, each app takes a slightly different approach.
Before you invest time and potentially money into any of them, get to know how they work and what will help you best.
Tips for using the right debt consolidation app:
• Research debt repayment strategies and choose an app that supports your preferred method.
Some debt consolidation apps focus on the snowball approach (i.e. paying off your smaller debts first), while others use the avalanche approach (i.e. say pay off the debt with the highest interest rate first). Other apps give you the option to choose which one you want to use or even create a custom payment plan. Before choosing an app, think about which debt strategy will motivate you the most to stay on track.
• Decide how a debt consolidation app will help you.
Some apps are best used for managing credit cards, while others focus on student loans. Some apps automate payments, while others are more about providing motivation to get out of debt. Some help you budget, while others help you calculate initial savings. Think about how you expect a debt consolidation app to help you and what tools you need to achieve your financial goals.
• Consider connecting your financial accounts.
Many debt consolidation apps allow you to connect your financial accounts or automate payments. If you’re interested in this feature, choose an app that offers it. Keep in mind that some apps limit the number of accounts you can connect. Also, make sure the app is trustworthy and won’t share or misuse your sensitive information.
• Look for reliable debt consolidation apps.
Once you have an idea of how you want to get rid of debt, it will be easier to compare apps and their functions. Some apps just help you track what you owe. Others automate your payments and connect to your financial accounts. Still others help you pay off your debts faster by rounding up your purchases and allocating the extra pennies to your debts. Pick a few that fit your situation and compare their features and availability.
• Compare interest rates.
Some apps offer lines of credit with interest rates that may be lower than those offered by your credit cards. You’ll need a reasonable credit score to take advantage of this service, but depending on what you owe and how much interest you’re currently paying each month, it could help you save some money.
• Think about the cost.
Some debt consolidation apps are free, but others require a monthly or yearly subscription. Make sure the app will save you more money than you spend. Otherwise, you will be working against your financial goals.
• Know when it’s time to check credit.
Apps can be a convenient and effective way to consolidate and pay off your debt. However, if you don’t qualify for debt consolidation or are having trouble making minimum payments on what you owe, consider consulting a credit counselor. Remember that a reputable credit counseling agency should provide you with information about the services and the agency itself without asking you for any of your personal or financial information first.
• Be careful with your personal information.
Debt consolidation apps will ask you for sensitive financial information, especially if you decide to connect your financial accounts. Double and triple check that you are dealing with a reputable app before forwarding this type of information.
Reanna Smith-Hamblin is president and CEO of the Better Business chapter serving this region. She can be reached at 502-588-0043 or [email protected].