Options for Consolidating Debt


Accumulating a large amount of debt can be truly detrimental to your quality of life, and the lives of your loved ones. In short, debt is accumulated when a person spends more than they make for an extend period of time, making purchases through loans and credit cards instead of with money they actually have. If you are facing severe debt and are afraid of bankruptcy or foreclosure, there are a variety of options and programs developed to give you a clean financial start, including debt consolidation.

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In short, debt consolidation involves taking all of your individual debts (loans, credit cards, etc.,) and blending them into a single, more manageable debt. Not only is it more convenient to make one, large monthly payment, but debt consolidation may also decrease the actual amount that you owe. In the end, debt consolidation is designed to help you owe less money so that you can reasonably pay off all of your outstanding financial obligations.

Home equity loans are one type of debt consolidation. A home equity loan consolidates all of your loans and uses your house collateral in the event that you are unable to pay. In order to take out a home equity loan, your house must be somewhat valuable. Typically, home equity loans are a good option if you want a lower interest rate. However, if there is any chance that you won't be able to make monthly payments even after you have consolidated all of your debts, using your home as collateral may not be wise.

Combining all of your debts onto one credit card is another type of debt consolidation. If you are paying high interest rates and want to combine your payments into one, paying off you debts on one new credit card may be a good idea. Many times, new credit cards come with low interest rates or other incentives that may help lower your monthly payment. When considering consolidating your debts onto one credit card, make sure you understanding the interest rates of your new card and be sure that you are able to pay off the debt before the low interest rate runs out.

Sometimes, taking out a personal loan is the best way to consolidate your loans. A personal has fixed payments but is unsecured. Personal loans may give you more time to pay them off than your current loan situation, but if your credit rating is low you may have trouble getting approved for a personal loan. Some companies offer special debt consolidation loans specifically designed to help people who are unable to meet their financial obligations. Ideally, these types of loans have lower interest rates and allow you to pay off your debt over a longer period of time.


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