How to consolidate your Debt
There are four good ways to consolidate your debt. The first method is to get a low interest home equity loan. These loans are secured with your property, which lessens the chance that you will default on the loan and allows lenders to offer you lower interest rates. You could also choose to cash out the equity in your home by refinancing or applying for a line of credit or second mortgage. While it can cost thousands in upfront fees to refinance your home, lenders can offer you overall lower payments. Often people will choose a line of credit or second mortgage because they typically don’t cost anything or are less than a couple of hundred dollars to open. Most people, however, choose the home equity loan, because the rates are lower.
The second way to consolidate is to get a low interest credit card account. By shopping around, you should easily be able to find a company that offers a 0% interest rate when transferring balances. Generally, these offers are introductory, so rates will most likely jump up in six months to a year. In the meantime, you can take advantage of the 0% interest and pay down your debt while the rate is low. There are some risks involved in transferring balances, so be sure you read the terms prior to opening a new credit card account in order to be aware of any fees involved when making a transfer.
A third good option is a personal loan. Offered through various financial lenders, this type of debt consolidation loan can help reduce your monthly payments. Rates will be higher because the loans are not secured, but they are still considerably less than the rate you’ll pay on a credit card.
Fourth, shop the various loan rates. Always be sure to research the rates, no matter what type of loan you’re looking into. You will likely save thousands of dollars by comparing the different lenders and types of loans they offer. This does not have to be a painful process; most lenders post their rates online so you can access them easily. Just be sure to read the terms beforehand so you won’t get stuck paying a lot of unnecessary fees.
