With the current economy getting worse day by day, the debt problems are rising high. During financial catastrophes like unemployment, an extended illness, a divorce or other major life experience consumers are often forced to borrow loans. However, owing to the lack of sufficient income and rising expenses of the country they often fail to repay their loan on time. If you have incurred a huge debt and desperately looking for a way to fix your personal finance problems, debt consolidation can be a viable solution to your problems. If you decide to consolidate debt, read on the basic factors which you must keep in mind while consolidating your debts.
Debt consolidation explained
Debt consolidation is nothing but borrowing one loan to pay off a number of debts. Under a consolidation plan, you can club your multiple debts into one loan at a considerably lower interest rate and enjoy the convenience of servicing only one loan. With a consolidation plan you can usually transfer a number of unsecured loans into a secured loan or most conveniently a home equity loan, which comes at an astonishingly lower interest. By doing so, you can not only reduce the current interest rate on your existing loans but also can curb your monthly payment loads significantly. Read on to how you can you consolidate your debts and how it’s beneficial to your personal finance,
- Juggling with multiple interest rates on different credit cards? Consolidate your debts through a balance transfer. For this, all you have to do is you have to get hold of a lower interest credit card and transfer all your balance on higher interest credit cards to this new lower interest card. It will not only help you reduce your interest rate but also diminish your minimum payment due. It would be best to find a card, which offers 0% interest rate for an introductory period and transfer your outstanding balance into it.
- If you need guidance about debt consolidation, you can seek help from a reliable debt consolidation company. A consolidation company generally works on your behalf and negotiates with your lenders to lower the current interest rate you are paying. After appointing a consolidation company to take care of your finances, you can remain tensionless about debt payments and due dates. All you have to do is you have to make single payment to the consolidation company which will further send out the payments to other lenders. By consolidation, you can reduce10% to 60% of the amount you owed. However with scammers jamming the credit market, it’s not very easy to locate a good debt consolidation company. Therefore, make sure you consult BBB about the authentication of your debt consolidation company.
- Finally, if you are a homeowner, with sufficient equity in you home you can use it as collateral and take out a home equity loan. As home equity loan is a secured loan, it comes with a radically low interest rate, so if you can use this loan as a consolidation loan, you can save thousands in future. However, remember home equity loan always carries a risk of foreclosure, so if you are not willing to risk your home, you can use an unsecured loan with a slightly higher interest rate as a consolidation loan as well. However, in this case, you will lose the tax benefits offered by a secured consolidation loan.
Take into account the following points, while consolidating your debts and bring your personal finance back on track with ease.