Do you have multiple debts? Are you struggling to pay the expensive interest rates and monthly payments? You could consider consolidating your debts to reduce the interest you're paying and pay your debts off faster.
Debt consolidation is an option that allows you to minimise debt problems without resorting to bankruptcy. However, you still need to be responsible when consolidating your debts. You need to create a strategy that allows you to pay your debt on time and avoid defaulting on your new credit.
There are various ways to consolidate your debts which we will outline below.
How does debt consolidation work?
There are various ways of consolidating debts, but most of them have the same single purpose - to merge different debts into one single payment with a reduced interest rate. You can consolidate various loans, credit cards, and other unsecured debts to that end.
Choosing to consolidate your debts will require you to make monthly payments for your new credit over a specific repayment period until it has been paid off. When considering debt consolidation, you should look for a loan provider that offers a debt consolidation scheme with a competitive interest rate and monthly payments.
Debt consolidation loans
You can obtain a personal loan to consolidate multiple debts. Debt consolidation loans, like personal loans, typically have fixed interest rates. They tend to have lower APRs than other loan options or credit cards.
You will have a better chance of securing a debt consolidation loan if you have a good credit score. If your credit score is less than perfect, you might find it difficult to find a lender willing to offer you a debt consolidation loan.
Shopping around online can uncover a loan option that will fit your financial situation. Apply for a debt consolidation loan at MatchFinancial.com now.
Credit card balance transfers
Credit card balance transfers are another popular option for people with multiple credit card debts. This approach is a DIY debt consolidation where you transfer your credit card balances to one credit card with a more affordable interest rate.
If you're starting a new business venture, you can apply for a credit card. It is sometimes possible to find a credit card offering an introductory 0% interest rate period - lasting for one to two years - on credit card balance transfers.
However, you need to ensure you pay off what you owe before the end of your introductory period to avoid incurring excessive interest. To get the best deals, look for credit card issuers that offer longer introductory periods and which waive balance transfer fees.
Home equity loans
You could consider offering the equity in your home as collateral to secure a debt consolidation loan. The number one advantage of this approach is that you can significantly reduce your payments every month.
However, home equity loans also come with risks. Your lender can repossess your home if you fail to repay what you owe. So, you need to be absolutely sure you can afford the loan and pay it on time to avoid the risk of losing your home.
You can borrow the amount you need in a lump sum, or you can also choose a line of credit that you're allowed to use for a specific period.
Debt management plans
You should seek expert advice at the earliest opportunity if you think your debts are getting beyond your control. They can evaluate your financial situation and provide you with a strategy to pay off your debts.
Your credit counsellors may be able to talk with your creditors and negotiate a lower debt payment through a debt management plan. You may end up paying the counselling agency who then distributes your payment to your creditors at an agreed-upon rate.
There are several ways to consolidate your debts. If you're having a hard time paying multiple loans or credit card balances, you can combine them into one payment with an affordable interest rate. Consider the options mentioned above for that purpose.
Copyright 2020. Featured post made possible by Bree Diaz