Easy Ways to Consolidate Your Debt
If you end up with too much debt to pay off, or if you have so many credit cards, loans and other liabilities that you can’t keep track of them all, debt consolidation is a useful tool to bring it all together. It is sometimes easier to focus on paying down one big loan than to try to pay off a bunch of smaller ones. Furthermore, your large loan may have lower interest rates, making it a smart investment.
There are many different ways to consolidate your debt, ranging from simple balance transfers to full-on renegotiation and credit card debt forgiveness. Depending on your financial situation, you may choose to use any or all of these.
Balance Transfers – If possible, you could pay off all your debts and transfer all your credit card balances to a single, low-interest card or line of credit. This would save you money in the long run and let you turn the page on all but one of your debts.
Home Equity Loans – If you own a house, you could use your home’s equity to pay off all your loans. That way, you simply have to pay a slightly higher mortgage, but you get rid of all your other debts. Mortgage rates tend to be lower than credit card interest rates, so this is a smart financial choice as well. Home equity loan interest is often tax-deductible.
Retirement Funds – For individuals with job security and a retirement plan, you could use that sum of money to pay off your debts. Just be sure that you aren’t in danger of losing your job, as if you lose it before paying back your retirement plan, you will owe the full amount immediately.
Life Insurance Policies
If you own a life insurance policy, you could use it to consolidate your debts. However, be sure you pay it back before you die, or your beneficiaries won’t get the full amount.
Friends and Family
While money often breaks up families and friends, if you feel that your ties to your loved ones are strong enough, you could always ask them for money to pay your debts. Family members generally don’t charge interest, and unless they’re also strapped for cash, their terms are generally a bit more favorable.
Credit Unions
Personal loans through credit unions are a good way to consolidate debt. Interest rates are low, and membership is generally easy.
Credit Counseling
There are services which will help you pay back your creditors. Some even provide a path to debt forgiveness, while others simply provide counseling and moral support to help you get through hard, debt-laden times. Be sure you check a counseling service’s credentials before signing on, though, as there are several unscrupulous businesses out there.
Renegotiation
Directly renegotiating your debt with lenders is difficult, and you may need the assistance of a lawyer or debt settlement organization. However, if you are successful, this is the most effective way to consolidate your debts. One primary lender could take on your full balance and offer you a deal to pay it off, at a discount, under one account.
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