Six of the best ways to consolidate your debt to save on interest expense from Bankrate. They are one of the leading financial and budgeting companies, so their advice is invaluable.
1. Home equity loans. With historically low interest rates, they're inexpensive, still fairly easy to obtain and they may even offer you a tax deduction for the interest portion of the loan. The downside of a home equity loan is that the collateral for your loan is the house, so you need to ensure the loan is paid. Another disadvantage of using a home equity loan to consolidate debt is the low-pressure repayment terms. Unfortunately many lenders are not in a hurry for you to pay a home equity loan back. The leisurely repayment schedule isn't part of your goal. The new monthly payment on your loan should be at least as large as your previous monthly payments. That is if you really want make progress paying it back. If you can pay more, you should, because you'll pay off the loan faster.
2. Low interest rate (or zero %) credit card transfers. Low balance transfers still exist. However, rate “surfing” makes sense only if you can pay off your outstanding credit card debt within the time frame of the low introductory rate. You do not want to have the debt not paid off if/when the rate resets. While you may be able to get another low rate credit card, the more time that this goes on, and the more low rate transfers you complete, the more risky this becomes. Read more and find a zero interest rate credit card. More.
3. Life insurance. If you have a whole life insurance policy, you can borrow against its value and use the funds to consolidate debts. There's no time limit. And the best is that you don't have to pay it back at all. If you don't pay it back to the insurance company, the amount of the loan you took is deducted from the benefits paid to your beneficiaries.
4. Join a credit union, or talk to your credit union if you are in one now. Credit unions almost always offer lower interest rates and also have lower fees on loans. If you're not a member of a credit union, you need to check with your employer, local organizations that you may be a member of, or family members to find one and determine if you are eligible to join one.
5. A nonprofit consumer credit counseling agency can help you consolidate debt and bills. You may want this to be your first stop. Experts in helping consumers reduce and get out of debt, they will work with your creditors regularly to get interest rates reduced and late fees waived. These pros have heard it all. Nothing you tell these organizations will surprise them. Sometimes what they will do is offer you the option of rather than consolidating debt, you need to pay them a fixed amount and they pay it out to your creditors. Read more and find a listing of the numerous non-profit credit counseling agencies, all of which provide numerous free services and advice.
6. Renegotiate the payment and debt terms with your lenders. Or talk to a professional to have them renegotiate your debt. Most lenders or creditors would rather renegotiate than sue you, repossess your home, or have to spend money to collect from you. You can go to your creditors and say something like, 'I know I am behind on my debt. Can we stretch out the payments?' It is pro-active and an honest relationship. Your creditors lose money if you default, or go bankrupt. Most lenders and creditors will renegotiate your debt and bills.
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