Getting into debt is hard, but getting out of debt is even harder, especially when you have multiple creditors, payment amounts & dates. Does this sound familiar to you and does it feel like you’ve lost control over your finances? Then it might be time to think of getting some help in the form of debt consolidation. This is a strategy to get all (or most) of your debts in one, monthly, payment. Debt consolidation can save you money, get you out of debt faster & give rest. Sounds good right? Check out these 4 options.
Balance Transfer Credit Card
One of the options to get out of debt is by getting a transfer balance credit card. Note, this option does contain some things you should consider before purchasing this credit card. If you want to pay your debt via a balance transfer credit card, you need to get a card of which the limit is high enough to pay all your debts and an APR low enough that you’re not paying too much interest. Fortunately, there are credit card companies that offer a low-to-zero-interest for a set period (1 to 18 months). Paying off your debt via credit card is a great way if you’re able to repay your debts in this zero-interest period, otherwise you’ll get even more debt. Check how long it will take to consolidate your debt with a ‘balance transfer credit card calculator’ and see if this is an option for you. If not, don’t give up hope, there are more solutions to get out of debt.
Home Equity Loan
If you are a homeowner, this might be an option for you. If you appraise your house and it turns out to be worth more than you still have to pay for mortgage, you have home equity. You can take out a (private) home equity loan on this and consolidate your debts.
A home equity loan is a good method to turn the equity you’ve built in your house into cash, especially if you use the money to improve your estate’s worth. Always keep in mind that you’re putting your home on the line—if real estate values fall, you can find yourself paying more than your home is worth. Note: this is only possible if you have a good credit history and only recommended if the interest rate is affordable.
Personal Loan
This can be a good option to relieve debt if you’re able to qualify for a loan with an affordable interest rate. Some pros of a personal loan are that you don’t have to use collateral to get approved and the rates & payments are fixed. A big con is that you need an exceptional credit to qualify for low rate personal loans. Otherwise it could cost just as much or perhaps more than a credit card. Besides that, a personal loan will do you more harm than good if the loan you’re considering has a triple-digit interest rate and you have limited or uncertain options of repaying it.
Debt Consolidation Programs
It’s understandable that you don’t want to get a loan or balance transfer credit card to pay off debts. Fortunately, there are options for this as well. With debt consolidation programs, you will work with a credit counseling agency to write down a plan on how you can pay off your debt in a realistic way.
The process of consolidating two or more loans into a single larger debt is known as debt consolidation. Consumers that have a great amount of high-interest debt often take this option. Credit card debts, auto loans, student loans, medical debt, and other sorts of loans are frequently combined into a single loan.
When creditors agree with this plan, you pay a certain amount to the agency every month and they will transfer the money to your creditors. The agency will do the hard work for you and you’ll receive all the payment information, so you have a good idea of what’s happening with your finances and when you’re out of debt.
Consolidating your debts does not guarantee that you will never be in debt again. If you’ve lived over your means before, you might do so again once you’re debt-free. Make a realistic budget and stick to it to help avoid this. You can also consider talking to a financial advisor to help you stick to your budget.