Accumulating debt is very easy nowadays, which makes debt consolidation that much more important to the everyday consumer. The basic idea behind debt consolidation is that a consumer takes out one loan in order to help them pay off a number of other loans. The advantages of consolidating debt include a lower interest rate that is often secured, and the simplicity of dealing with just one loan instead of several.
A first word of
warning is to steer clear of debt consolidation companies. These are the ones that run commercials
promising debt help despite your poor credit. They will charge application and handling fees that other sources of
help would not charge, and will oftentimes charge up to 23% in interest, which
would be reflected negatively in your credit rating.
Credit cards often
charge high rates of interest, which makes them a popular candidate for debt
consolidation. In this case the process
is relatively simple. If you hold
several credit cards with high rates of interest, you can simply transfer their
balances to a single credit card with a lower interest rate. Many times, you will be able to find credit
cards offering a low introductory APR, and oftentimes this introductory rate
will actually be 0% for the first six months.
If you are
accumulating credit card debt because you are constantly spending more than
your actual income, then consolidation will not help in the long run since your
credit card balances will inevitably surmount again. As unappealing as it is, you may have to
force yourself to look long and hard at yourself in the mirror in order to see
that you may have to change your lifestyle and spending habits in order to fully
take advantage of debt consolidation. Cancelling
your newly-zeroed credit cards is a good place to start.
If you are a
homeowner then you should look into obtaining a home equity loan. In this case your home will act as
collateral. So long as your loan is not
more than the value of your house the interest on the loan will be tax deductible. Remember that if you default on this loan, it
is very possible that you will lose your home.
In other cases of
debt, you can find help at your local bank or credit union in the form of a
secured or unsecured loan. The
difference between the two is that a secured loan requires you to put up
property as collateral, while an unsecured loan does not require any
collateral. Needless to say, it will be
more difficult to qualify for an unsecured loan.
Disclaimer:
This article is presented solely as an example and is not meant to replace qualified
financial advice. If you or someone you know require up to date financial or
legal help, seek qualified assistance. No content on this site should ever be
used as a substitute for direct legal counsel from your lawyer or a qualified
attorney.
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