In today’s world it is not hard to find yourself buried in a pile of debt. The economy does not help with this situation and many people are finding themselves in the red and trying their hardest to pay off the debt with no luck. In fact because of the interest charges you can pay on credit cards and loans but instead of paying off the debt you are incurring even more. This is when debt consolidation can come into play. What this means is that you are looking at consolidating all of your debt into one balance. This will keep you from having multiple balances as well as multiple interest rates and payments each month. Continue reading below to learn more about the debt consolidation process so that you can start saving money sooner rather than later.
Do A Balance Transfer
If you find that you have a credit card that comes with a high interest rate you can look into finding a credit card that has a lower interest rate. Some credit cards come with an introductory promotional interest fee of zero percent. This can help you to pay off the debt faster. Of course you will need to have great credit in order to qualify for this type of rate. Most of these types of offers have a short life span and will expire within a year or two so it is imperative that you use the time you have wisely to pay off your credit card balance.
A newer type of loans that can be used as debt consolidation loans is what is known as a peer-to-peer loan. This is when the borrower will borrow from an individual lender rather than going through one of the traditional financial lenders. One of the biggest benefit to having a loan of this type is that the interest rate will be much lower than that of other types of lenders and the better your credit is the lower the interest rate will be. These loans work similar to the traditional loan meaning that you will have a set amount of time to pay off the loan and usually a fixed payment to help pay off the debt within a notable time.
Use Your Home Equity
A great way to consolidate your debt is through a home equity loan. Of course this will only work if you own your own home. It also comes with the risk of if you do not pay on time you could risk losing your home. However if you are careful to not overextend your funds and pay the debt back you could find yourself debt free with this type of loan.
If you have exhausted all of your other options when it comes to debt consolidation you could possibly borrow from your retirement. This should be used as a last resort as the money you have saved should remain for your retirement. However there is a benefit to borrowing fro your retirement and that is that you pay yourself back to your own account rather than paying a lender back. Of course it also jeopardizes your retirement savings if you do not pay it back.
Borrowing money to help you consolidate your debts is a large decision that needs to be thought through carefully. However once your debt is paid off you will find that you will have money left at the end of the month and that can be a great feeling. It will also improve your credit score and you will be able to live financially secure.
Image credits to : mitch wells