Should you use a debt consolidation app?

by: Better Business Bureau

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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) in any of them, get to know how they work and what will help you best.

Tips for Choosing the Right Debt Consolidation App

  • Research debt repayment strategies and choose an app that supports your preferred method. Some debt consolidation apps focus on take a snowball approach (i.e. pay off your smaller debts first), while others use the avalanche approach (i.e. 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 application, consider what 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 manage your debt and what tools you need to achieve your goal. 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. However, keep in mind that some apps limit the number of accounts you can sign in to. Also make sure that the app is reliable and does not sharing or misusing your sensitive information.
  • Look for reliable debt consolidation apps. Once you have an idea of ​​how you want to get rid of your debts, it will be easier for you 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 struggling to make even the minimum payments on what you owe, consider credit counseling. 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 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.

Source: BBB.org

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