Whether you’re drowning in credit card debt or fighting to manage multiple loan payments, consolidating your debts into a single amount can relieve a significant amount of stress, save you money, and in many cases, help you pay down your debts faster. Not to mention, it can substantially simplify your monthly payment schedule, taking stress and responsibility off your plate.
With multiple debt consolidation options available, though, it can be overwhelming simply deciding which one is right for you. In this article, we will break down four of the most common debt consolidation options and how they can help you wipe out your bad debts.
No matter which option you choose, it is important to know that selecting the best one for you will depend largely on your personal financial situation, income, credit score, and more. While these options work for many people, you need to carefully consider which one best meets your long-term financial goals.
#1: Balance Transfer Credit Cards
If you’re managing multiple high-interest credit card debts, balance transfer credit cards may be a feasible debt management option for you. This approach involves transferring all of your debts to one card so that you only have to make one monthly payment.
Caveat: The limit on the card will need to be high enough to accommodate all the balances you are rolling over, and an APR low enough to make it worthwhile. Also, if you apply for a new card to accomplish this goal, the issuer will request your credit and financial history which may reduce your chances of getting approved if either is a challenge.
However, because credit card debt is typically unsecured, you won’t have to risk losing any of your assets. Not to mention, this approach is often quicker and easier than obtaining a bank loan to help you pay off your debts.
#2: Home Equity Loans
Homeowners with decent credit and a substantial amount of equity in their homes can pull from their home equity to pay down debts. Home equity, in short, is the difference between the appraised value of your home (as distinguished from the tax value) and the balance on your mortgage loan.
This option is useful in that home equity loans involve lower interest rates than credit cards. They also tend to be larger than typical credit limits. The repayment periods are longer, which means lower monthly payments – but this also means that more interest will accrue throughout the life of the loan. In pursuing this option, make sure you are prepared to maintain these payments in the long run. Home equity loans may also come with variable interest rates, so ensure you are prepared to adjust your monthly payments as the rates fluctuate.
#3: Personal Loans
Many banks offer personal loans to help you pay off your debt. While it is important to exercise caution, as lenders may offer the highest interest rates and fees possible, taking on a personal loan may nonetheless be a valuable option for you – provided you have a plan to pay back the loan once you’ve resolved your high-interest credit card debts. Moreover, personal loans are unsecured, meaning you will not have to offer your personal assets as collateral – and thus there is no risk of losing them.
Sometimes it may make sense to take a personal loan from a friend or family member. This is a useful option provided you have family and friends that have funds to give you a personal loan and you feel comfortable asking for it.
#4: Debt Consolidation Programs
If you want to secure a debt consolidation option that doesn’t involve taking on a loan or applying for an additional credit card, consider enrolling in a debt consolidation program. This approach involves working with a debt consolidation company to draft a payoff plan feasible for you and your creditors.
The process would vary based on your particular program, but in general, would involve making a single monthly payment to your debt consolidation program. The debt consolidation company would then use the funds to make payoff arrangements with your creditors until all the debts in the program are paid off.
If you choose to pursue debt relief through debt consolidation, it’s critical to know and understand your options and to be your own advocate in selecting the course that’s right for you. It can be helpful to engage a reputable debt consolidation program to help you navigate this process. Countrywide Debt Relief offers more than 30 combined years of helping consumers like you find financial freedom. Contact us if you’d like to learn more about your debt consolidation options and to discover how this approach can help you manage your bad debts.