Ways to Consolidate Debts

2007-03-08 10:33:40

( Financial )



Debt accumulation is a problem that many of us have experienced. Nowadays, it is very easy to get loans and credit cards. Such debt facilities are literally just a phone call or a mouse click away. Thus, many spend and borrow way beyond their means. We end up accumulating debt that we can no longer pay.

Below are some of the ways we could consolidate debts to help us get out of debt fast.

Self-repayment scheme

An effective way to consolidate your debt, if you are a disciplined person, is to device a personal payment plan. Budgeting is an important element to the success of this plan. First, you have to compute all your expenses and earnings for a month. Then, determine how much money is left for your debt payments. If you don’t have enough spare money, try to find ways to minimize cost and earn extra income. Sometimes you may even need to take on several part-time jobs to get out of debt fast.

Credit cards

You can also use credit cards to consolidate debts. Financial companies usually issue credit cards even if you don’t have a very good credit rating. Shop for the best deals by contacting several credit card providers and asking them what interest rate they are willing to offer you if you decide to transfer your balances from other credit card companies to them. Don’t be afraid to negotiate. Remember that even a slight decrease in interest rate or suspension of fees is crucial in your plan to get out of debt.

Credit counseling

Another good way to start consolidating your debt is through credit counseling. You can seek professional advice on how to consolidate debt based on your means and targets. However, most credit counseling companies do not provide actual debt consolidation facilities. They are just there to give you an advice on how to consolidate debt.

Conventional debt consolidation loans

Debt consolidation loans are usually unsecured loans. Lenders consider this type of loan as risky so you should not expect to get very low interest rates. A debt consolidation loan is not advisable to those who only have few debts because they might end up spending more. A debt consolidation loan is usually for people who are really in dire need of help in getting out of debt.

Other loan types

Other loans that could help you consolidate debts are home equity loan and refinancing mortgages. Such loans, however, are only applicable to homeowners. Both refinancing mortgages and home equity loans use your home equity to get additional cash. The things to look out for before getting such loans are interest rates and monthly payments. Be sure to take advantage of these loans to pay off your debts only if you have means to pay. Remember that failure to pay such debts might cost you your home.


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