If you are working on managing your money better and paying down your debts, a debt consolidation app can help you track and manage what you owe. However, each app takes a slightly different approach. Before investing time (and potentially money) in one, know how they work and which will best help you.
Tips for picking the right debt consolidation app
- Research debt payoff strategies and choose an app that supports your preferred method. Some debt consolidation apps focus on taking a snowball approach (i.e., paying off your smallest debts first). In contrast, others use the avalanche approach (i.e., paying off debt with the higher interest rate first). Other apps allow you to choose which one to use or create a personalized payoff plan. Before you pick an app, consider what debt strategy will most motivate you 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 motivating to get debt-free. Some help you to budget, while others help you calculate early payoff savings. Consider how you expect a debt consolidation app to help you with your debt 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 this feature appeals to you, choose an app that offers it. However, remember that some apps limit how many accounts you can connect. Also, ensure the app is reputable and won’t share or misuse sensitive information.
- Research trusted debt consolidation apps. Once you know how you want to get rid of your debts, comparing apps and their functions will be easier. Some apps simply help you to track what you owe. Others automate your payments and connect to your financial accounts. Still, others help you pay down debt quicker by rounding up your purchases and putting the extra few cents towards your debts. Choose a few that work with your situation and compare their functions and availability.
- Compare interest rates. Some apps offer lines of credit with interest rates that may be lower than your credit cards offer. You will need a reasonable credit score to take advantage of this service, but depending on what you owe and how much interest you pay each month, it might help save you money.
- Think about the cost. Some debt consolidation apps are free, but others require a monthly or yearly subscription fee. Be sure the app will save you more money than you’ll spend. Otherwise, you’ll be working against your financial goals.
- Know when it’s time for credit counseling. Apps can be a convenient and effective way to consolidate and pay off debt. However, consider credit counseling if you don’t qualify for debt consolidation or are struggling to make even the minimum payments on what you owe. Remember that a trustworthy credit counseling agency should give you information about services and the agency itself without asking for any of your personal or financial details upfront.
- 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 handing over this information.
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