If you have a lot of debts in a several different areas, you might consider debt consolidation in order to get all of your debts into one central area. That way, you have one payment to make instead of lots of payments.
You may have a lower interest rate overall, and a smaller payment to make on a monthly basis. It’s often easier to manage as well since it’s only one payment instead of many. But you will want to think about what the smartest move to make is and that can depend on your situation. To get started, here are a few different ways to consolidate.
Personal Loans
If you have credit card debt, student loans, or other debts you want to combine, having debt consolidation done through personal loans is certainly an option to consider. Personal loans can be taken out for any reason and once you have the money, you can use it for anything you want. People often use these types of loans for home improvement projects as well as debt consolidation and many other things.
What you would want to do is figure out how much you own in whatever areas you want to pay off and get the loan for that amount. You would use that money to pay off those loans and then, all you would owe is what you borrowed for the personal loan. As long as you have good repayment terms, it can help you get a lower interest rate and one low monthly payment over whatever you were paying on all of the loans before.
Home Equity Loans
If you can’t qualify for a personal loan with good terms or you don’t want to go that route for whatever reason, you might consider a home equity loan. If you have lived in your home for quite some time, and you have paid the mortgage faithfully, you probably have some equity built up within the home. You can refinance and get that equity back in cash so you can use it to pay off your loans.
Then, you would pay your mortgage, as usual, and that would be all you would owe. It’s a nice way to get debt consolidation built into something you are already paying on. While you will likely have to pay on your mortgage longer because of the extra equity you took out, it would likely be easier and with less interest than your other loans. Just be careful with this option; if you default on the loan you could lose your home.
Credit Card Balance Transfers
If you have one credit card that has a nice, low interest rate and others that are much higher, you might be able to transfer the debt of most of them onto one card so that you only have that card to pay. You can consolidate your debts into one location and pay just one balance instead of multiple cards that have interest rates adding up quickly.
When you have a lot of debt and you aren’t sure what to do about the different bills coming from different directions, debt consolidation is something to consider. You might be able to work out a way that you can have just one loan or area of debt instead of lots of them.
You could have a lower interest rate and just one monthly payment, which can also be smaller than the others combined. Since there are lots of options to consider, it’s best to talk to a financial professional about where your debts lie, what your overall budget situation is, and what you want to do in order to make the best decisions for your future. Examine the terms with care, as you want to end up better off than where you were before, not worse off.
