Should You Consolidate Your Debt?
Consolidating Your Debt Can Greatly Reduce Your Monthly Interest Expenses and Lower Your Debt Payments
Should you consolidate debt? If you have a lot of loans and debt from many different sources, or you find yourself paying high interest rates on credit cards, you may want to consolidate debt by using a debt consolidation or debt management program. Debt consolidation can not only reduce the interest rate you're paying, but it can significantly reduce your monthly debt obligation and it can consolidate all of your monthly debt payments into one monthly payment. Debt consolidation is not for everyone, but it's worth investigating. Also, if you decide to consolidate your credit card debt, please make sure that you don't continue to spend on your credit cards, as many people fall into this trap. If you're not confident that you can stick to just your consolidation loan, you should either find a lower interest rate credit card, or cut up the credit cards you're consolidating.
Before you consolidate debt, you should explore the following options:
- If you own your own home, you may be able to take out a home equity loan, second mortgage or line of credit. You could likely get very low interest rates right now and the interest would be tax deductible. This could cut your payment to a manageable amount and reduce your tax burden.
- If you don't have enough equity in your home to take out a home equity loan, you could try getting a personal loan backed by your automobile or other real property. Because these loans are secured, you should get a lower interest rate loan and it would consolidate all your payments into one much lower payment. If you can't get a secured loan, you may be able to get a personal loan from your bank or other lender based just on your credit (if your credit is good). Click here to find companies offering loans.
- Depending on your credit card limit, you may be able to transfer all of your balances onto one low interest rate credit card. If none of your cards are offering a low interest rate card, try signing up for a new credit card.
- Many debt management programs will hurt your credit, so it's important to monitor your credit afterwards. There are many programs that help you repair and rebuild your credit.
See Also: Debt Advice
