Debt Consolidation
Are you struggling to make the minimum payments on your credit cards or bank loans? Or perhaps you are putting off paying bills that you simply can’t afford? If this sounds familiar it is time to consider debt consolidation to regain control of your finances. There IS help out there and it doesn’t always mean bankruptcy.
Just Remember:- Don't panic.There are things you can do to get your debts under control.
- Help is available from financial counsellors and other free advisory services.
- Don't ignore your debts.You will end up in a worse position if you do nothing.
What Debt Consolidation Can Do for You
No matter what the cause of your debt, you owe it to yourself to get your finances back on track. Debt consolidation can do just that by taking all of your debts or outstanding balances and combining them into one lower monthly payment. This means one interest rate and only one pay date to remember each month.
Depending on the type of debt that you have and the method you use, consolidation could help you save on interest and get out of debt faster. You should speak to a professional debt consolidator or consider using an online debt consolidation calculator to figure out your payment abilities. Below is more information on the various ways to consolidate your payments based on the type of debt that you carry.
Debt Consolidation Methods
There are a variety of different ways to lower your monthly payments and the interest you are paying out on your debt load. Credit card debt and unsecured loans require a much different approach than mortgages and secured loans. An unsecured loan is money lent that is not secured by the borrower’s assets. Secured loans, on the other hand, require an asset as collateral in case of non-payment. Below are the debt consolidation methods that are effective for each type.
Credit Card and Unsecured Debt
One option with credit card debt is to transfer the balances to one card. Check to see what the maximums are on your cards, and choose the one with a low Annual Percentage Rate (APR). Make sure the APR is not higher for balance transfers. Contact your current credit card company to find out what interest rate/APR they will offer if you transfer balances from your other credit cards to theirs. If you have an unsecured loan you can often group this balance in with your credit card debt as well.
Also, consider taking out a home equity loan or line of credit which lets you borrow money against your home. You can often get these types of loans at lower rates than credit cards or personal loans. Not only will you get a good interest rate, it may be tax deductible. Many issuers offer low closing costs or no closing costs for these loans. The money borrowed can be used to pay off your high interest rate credit cards and you are left with this one loan with a much lower rate of interest. Use this option with care. You will end up with less equity in your home, which will take time to earn back.
Mortgages and Secured Loans
If you can’t afford to make your monthly home payments refinancing your mortgage is a great way to reduce your monthly house payment and lessen the risk of losing your home due to foreclosure. By refinancing your home you will also free up some of your money that traditionally went to your mortgage, but can now be redirected to paying off your debt.
In order to qualify for the loan modification program, you have to agree to some terms. You must agree to go for debt counselling if your total household debt totals more than 55% of your income. Your household debt includes auto loans, credit cards and alimony.
Meet With a Professional Debt Consolidator
A part of the 2010 economic stimulus package is to encourage people who are in debt to seek the professional assistance of debt counsellors. Plans are designed to help you with whatever your current needs are. To find debt a counsellor consider doing a search for online counsellors, or contact your local bank or loaning agency to find out if they offer this service.
Keep In Mind:
Debt consolidation is not about getting extra spending money, it is just a way to get your debts paid off faster, and at a lower amount. With additional debt consolidation options available to citizens via the Federal Stimulus Plan, there is no better time than now to seek the help of a debt consolidator.