Should You and Your Partner Consolidate Debt? Talk About ItMay 10, 2017
So you and your significant other have decided to get married or move in together. Have you talked about money? It might not seem romantic to discuss whether you need to consolidate debt or create a household budget or set savings goals. But almost all couples think that talking about finances before they get married is important. Unfortunately, according to a recent poll, only 35 per cent of couples have that money talk beforehand.
With two out of three marriages or common-law relationships starting off with some level of debt it creates a need for partners to work together to get out of debt. Whether you decide to tackle your debt jointly or individually, there are professional debt options to help you pay off debt faster. One option would be a plan to consolidate all of your debt — yours and your partner’s. Here’s what you need to know about debt consolidation and how it might be able to help you with your debt reduction efforts.
Consolidating debt refers to combining multiple debts into a single debt through a consolidation loan. You can explore a debt consolidation loan through your bank or any major financial lender. What are the benefits of consolidating debt?
- Debt management becomes easier with one debt to manage rather than multiple debts.
- Consolidation loans can have lower interest rates than high-interest credit cards.
- There is a fixed end date for repayment of the loan, which is not the case with revolving credit, like lines-of-credit and credit cards.
- Your monthly payment is lower each month for the single loan than it is for the combined total of the multiple debts.
- The reduced monthly payment could mean more room in your budget to allocate for savings or debt repayment.
After consolidating your debt what else can you do to get out of debt faster?
If you’ve consolidated debt and are not currently working from a monthly budget that would be the next suggestion. Your monthly budget will help you and your partner gain a better understanding of your complete financial picture. You can each keep track of you how much money you have coming in and what expenses are going out. If you’ve never had a budget before, the Financial Consumer Agency of Canada has a great budget building tool to help you get you started.
As mentioned earlier, one of the benefits of debt consolidation is a lower monthly payment. The lower monthly payment presents an opportunity to pay down your principle debt amount, decreasing your interest charges. Try using an effective debt repayment method like the debt snowball or debt avalanche.
The debt snowball focuses on paying off your smallest debt first and then works up to your largest debt. The debt avalanche focuses on paying off your highest interest debt first then works down to your lowest interest debt. Each allows you to pay off debt faster. As each debt if paid off, you have more money to apply to the next debt.
The teamwork you and your partner put in to consolidate debt can go a long way to reducing financial stress, which could otherwise have a negative impact on the well-being of your relationship. Make sure to schedule regular conversations to discuss other financial topics too, like savings goals and spending habits. Keeping these lines of communication open can go a long way towards achieving and maintaining financial good health.
Do you and your significant other talk about money regularly? Join the conversation on Twitter using #LetsTalkDebt.