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How to Consolidate Debt

Consolidate Your Debt: Different Ideas

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how to consolidate debt

It is important that you know how to consolidate debt if you are going to find the right solution for you. There are some great reasons why it is important that you should look into the possibilities of debt consolidation.

  • You will only have one bill to pay each month
  • The payment will stay the same
  • Interest rates should be lower
  • The overall cost of the debt should be reduced

There are a number of different ways to consolidate any debts and it is vital that you choose the right option for you. It is not going to be easy and it might take a bit of hard work but if the end result means that you are better off each month then it will have had a positive impact.

Reason Why to Consolidate Your Debt

It is important that if you are considering consolidation that you understand the reasons for consolidations and the final product that you are offered suits your needs and reflects in a positive manner on your credit file. You should not be paying more each month for your consolidation loan and you do not want the term to be longer than five years to be completely debt free.

There are many different options that are open to you if you are looking at how to consolidate then you might consider what options that you have available to you.

Approaching a Credit Card Company

You might be able to get a balance transfer to your current credit card, ask them for the best interest rate if you were to transfer and ask if they will not charge a fee. If they don’t offer you any savings tell them you will go elsewhere they might help you.

Do not apply to loads of different credit card companies because this will be recorded on your credit file and will have a negative impact. Always make any repayments on time because you might end up increasing the debt rather than reducing the debt.

How to Consolidate Debt with A Home Equity Loan

This consolidation loan means that you are borrowing money on any equity that you have in your home. This is the value of your home less any mortgage that you have outstanding, if you have equity then it is possible to turn this into a loan, but if you fail to keep up the repayments you can lose your home.

Refinance

It is possible to refinance your home and take out extra money with which you can pay off your bills and this will save you money each month. But you will be paying for the bills over the entire length of your mortgage.

Debt consolidation loans

It is possible to consolidate by using a consolidation loan, these can be more expensive and if you have a lot of debt they might not be the best option for you. The repayment might be higher and the interest rate might be higher too. Or the term that they are looking to hold you for could increase to 10 years and this is a long time. It is important that you know the true cost of the loan including the interest payment.

Credit counselling

It is possible to learn how to consolidate debt by going to a counselling service and they will help you to budget and work out a payment plan that will pay off your creditors. Some counselling services pays your debts and you just pay them once per month, check if you company is going to do this that they are reliable, if a late payment happens you will get the mark on your credit file and not the counselling company.

Settlement companies

It is possible to get a company that will act on your behalf to reduce the total amount of money that you owe. You pay the company the money that you would have normally paid your creditor and they work out a settlement figure and this is sometimes a lot less than the original debt, but this will have a negative impact on your credit rating.

Borrow against retirement

If you have saved up for your retirement it is possible to borrow money against the money that you have saved. It will mean that you have not touched your retirement money but have still had a relatively low interest loan.

Rapid payment

There are many different names for similar practices of how to consolidate debt without going to other companies but doing it on your own.

You need to list the debt that you have and with the highest interest debt pay that one more each month until it is paid and you move onto the next debt and focus any extra money there. You just need to stop using any form of credit until you have taken back control.

Therefore it is possible to take control of your finances and get the best product that suits your needs.

There Are Ways to Consolidate Debt without Breaking Your Bank

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If you have many credit cards with debt on them life can be complicated. Outstanding debt can take over your life- depriving you of things that you would have otherwise liked to do with your money. It often takes a long time to pay these debts off. Some people moreover have debt on a large number of cards, for instance seven different cards. But, despite seeming like a daunting task, debt consolidation is possible. It will take some time to consolidate and pay off your debt, but there are a few ways to consolidate debt that you should explore in order to get out from under debt.

Use Debt Consolidation

Debt consolidation is a one of the most efficient ways to consolidate debt. This involves procuring a loan to repay all your outstanding debt so that instead of several high interest debts you have just one loan to pay off. High interest credit card debt, education loans and outstanding utility debt can be included in this loan, while mortgages cannot. Debt consolidation can be done by:

  • Major Banks
  • Non-profit debt consolidation companies
  • Credit Union

Ways to Consolidate DebtIt is a good idea to compare several debt consolidation loans before you decide on one as sometimes debt consolidation companies charge high fees in order to consolidate debt and this may add to your existing debt. However, banks or credit unions have lower interest rates on loans and lower fees. While you do need to demonstrate an ability to pay back your debt consolidation loan and steady income, getting a debt consolidation loan is fairly uncomplicated. Your debt consolidation agency will pay off all your debt on your behalf and you, then, will only have to pay one loan off at a lower interest rate than your credit cards.

Bank on Your Home

If your own your own home, use the equity you have on your home to pay off your outstanding debt. You can borrow, with a home equity or a line of credit, borrow up to 30% of your home’s value. Home equity loan and a home line of credit is a way to unlock the value in your home to solve debt issues. A home equity loan is a close-ended account that has to be repaid over a certain period of time while a home line of credit is an open-ended account like a credit card against which you can repay and borrow against. Home equity loans tend to have higher borrowing limits and low interest rates. This is beneficial as interest rates on home equity or a line of credit is way less than APRs on credit card balances. However, using the value of your home to pay loans does have its risks. If you forestall on payments you could put your house at risk. You may end up with home foreclosure, putting you in a worse position than before.

Borrowing from a Life Insurance Policy

Although this should not be your first choice, borrowing against a life insurance is a viable and preferable option than being bankrupt. You can borrow the cash value of your life insurance and use it to repay your high interest debt. You have to consider, though, that there is an interest on this loan (like any other loan) that needs to be paid at regular intervals. Remember if the loan is not repaid then you will no longer have life insurance for your loved ones after death.

Balance Transfer to other Credit Cards

If you have a card with a big credit limit or are being offered one, consider transferring any outstanding debt to the one with a higher limit.  Most companies that you consider moving to will offer you a low balance transfer interest rate, therefore by moving debt you will be saving money. By saving on interest, you may be able to pay debt back sooner.

Borrowing from Retirement

Remember that over all your working years, you paid into your retirement? You can get an advance on this retirement money. But, this really should be a last resort option because the amount has to be paid back over five years. Any money that is not paid back is considered early withdrawal and the amount is subject to income tax and penalty. If you retire the loan must be paid in 60 days or early withdrawal penalties will apply.

What’s Negative about Consolidating Debt

Debt consolidation can provide you with peace of mind and better credit ratings, but each has its benefits and harms. Know the benefits and harms of the debt consolidation method you choose and be sure to pick one that will get you out of debt rather than one that will push you deeper into it.

 

It is good to know about the several ways to consolidate debt as high interest debt can destroy your lifestyle. But, it is only viable if you are disciplined enough to pay off any debt consolidations as well and you make considerable effort to change your habits to pay off all debts.