You are in debt. That’s not good news, of course, but it doesn’t have to be the end of the world, either.
At this point, the best thing you can do is make a plan. You don’t want to go on forever floundering in debt, wasting hundreds of dollars per month paying interest on your accounts.
Ideally, you would like to get out from under your debts as quickly as possible in order to get your life on firmer financial footing.
One of the best options available to you is debt consolidation. Basically, you are going to bring some of your debts together into one place where you will hopefully be paying a lower rate of interest. When done correctly, this should let you pay off your debt faster, saving you money in the long run.
So, what options do you have for debt consolidation? Let’s look at three ways you can go about this task.
Use a Credit Card
It might seem a little odd to suggest the use of a credit card when you are probably trying to pay off credit card debt in the first place. However, the idea here is simple. You are going to look for a card with a lower rate than the one(s) you have now, so you can transfer your balance and pay down the debt as quickly as possible.
You may even be able to secure a card with 0% introductory rate, allowing you to pay on nothing but the actual outstanding balance for a period of time.
The downside to this approach is having to qualify for the card in the first place. If your credit is maxed out currently, you might not be approved, or you might not get a limit high enough to actually consolidate your various debts.
Get a Personal Loan
This might be considered something of an ‘old-fashioned’ method, but it can work. You are going to go to your bank, or another bank in the area, and request a personal loan. You will use the money from the loan to pay off your various debts. Then you will be left with the task of paying the loan each month.
This plan will only work if you can get a low enough rate to save money over your current debts. To do this, you will likely need a fairly strong credit score to get the loan.
Home Equity Loan
For homeowners, this just might be the best option of all, but there are risks involved. Here, you are going to be borrowing against the equity that you have accumulated in your home.
It may be possible to get a good interest rate with this option, along with a long repayment period. Of course, since you are borrowing against your house, you will be putting your home at risk if you fall behind on the payments of this loan.
In the end, you will need to move forward with the debt consolidation method that makes the most sense for your personal financial situation. The key is to shorten the period of time that you will remain in debt – find a way to lower your interest obligations so that more of your money is going towards reducing the outstanding balance on your accounts. Good luck!
Have you ever consolidated debt? What tips do you have for debt consolidation?
Photo courtesy of: Goumbik
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