Many consumers have a variety of debts. All the payments and different due dates are enough to drive anyone crazy. Wouldn't it be nice to address all of your consumer debts with one simple monthly payment? There are many options for consolidating your debt into a single loan and eliminating some of the stress from your life. The following debt consolidation options may be available for you.
1Credit Card Consolidation
You've seen the offers for 0% interest on balance transfers and purchases for the next year or two. These can be an effective way to transfer all of your debt to a single card and avoid interest payments for a while. For balances that can't be moved, the credit card could be used to pay off the debt.
2Reading The Small Print
Even a single late payment can cause the interest to kick in. In most cases, the interest is actually accumulating from day one. You only have to pay it if you miss a payment. One payment that you miss can send your whole plan down the tubes. It's important to be diligent and ensure all payments are made on time every month.
3On Life Insurance Loans
If you have a life insurance policy with cash value, you may be able to borrow against the value of the plan. The loan doesn't even have to be paid back. But it will reduce the amount your beneficiaries will receive.
4On Personal Loans
If you have a friend or family member with the financial means to help, you might be able to get a personal loan. Is your credit poor? If it is, this might be the only option available to you.
However, realize that your relationship could be at risk. Get a legal document spelling out the terms of the loan. This can put the lender's mind at ease.
5On Student Loans
Your credit card limit might not accommodate a student loan. But there's an entire market for student loan consolidation. The government guarantees the loan.
Hence, these loans are easy to get. You can consolidate multiple student loans into a single loan and payment. It's even possible to have the payback period extended.
6On Home Equity Loans
If you secured a great deal on your home or have been making payments for a few years, you have equity in your home that can be used to pay off your other debts. The interest rates are usually quite low, too. It's because your home is serving as collateral.
Home equity loans can be a convenient and reasonable way to pay off higher-interest debt. However, you're also putting your home at risk should you get behind on your payments. It's also possible to refinance your home and get cash at closing. There are closing costs to consider, but it's very similar to having a home equity loan. Refinancing will permit you to pay back that cash over the lifetime of the mortgage.
7On Retirement Plan Loans
Many retirement plans permit the account owner to borrow funds for specific periods. You'll be charged a small amount of interest. The interest payments go into your account, too! There isn't a credit check, but you'll be charged an early withdrawal penalty and taxes on any funds you fail to pay back.
If you have too many debts to manage, debt consolidation might be a good option for you. Debt consolidation is an effective way to deal with high-interest debt by lowering or eliminating the interest altogether. Debt consolidation is another tool to keep available in your financial tool belt.
Jackie Wing is an Alaska native, who enjoys snowboarding more than is probably socially acceptable. She lives in Anchorage with her two dogs Reese and Peanut, or as she likes to call them "Thing 1" and "Thing 2."