You’ve read about debt consolidation? You have probably heard the term, but do not fully understand what is involved. Anyone with multiple creditors can use debt consolidation to fix their situation. Picking your plan wisely is the key. This article will teach you about debt consolidation and what it can do for you, as well as what to avoid.
Prior to taking action, do a thorough review of your own credit record. To prevent the same mistakes in the future, you need to consider why you made them and how they affected you. This helps you avoid making the same mistakes again.
When considering what options are available to you with debt consolidation services, avoid the assumption that anyone advertising themselves as non-profit is automatically trustworthy or affordable. This term is often used as a disguise for predatory lenders and you could end up with very unfavorable loan terms. Check them out at the BBB’s website first, or ask people you know for a recommendation you can trust.
Do you have life insurance? You should think about cashing your policy so you can pay your debt off. Get in touch with your insurance provider to ask much your policy is worth. It may help you reduce your debt to a more manageable level.
Inform your creditors that your are working with a company to handle your debt consolidation. They could be willing to speak with you about making different arrangements. More than likely, they won’t know it on their own, so make sure they know it up front. If you show them you are trying, they might want to help you out.
Home owners can refinance their mortgage to pay down their debts. When mortgage rates are low, you can use this method to consolidate your debt. You might even have a lower mortgage payment.
You can get a loan that will help pay off many smaller debts. Often creditors will accept a lower payout than the amount owed, if you pay in cash and pay the entire amount off. This does not negatively affect your credit rating and can actually increase your credit score.
Consider borrowing against your 401k plan to pay your debt off. It offers you the ability to borrow from yourself as opposed to borrowing from a traditional bank. Just remember that taking money from your retirement funds can be a risky action, so make sure you explore the pros and cons before choosing this option.
If you don’t want to do a consolidation loan, then consider putting as much as you can to paying off debts with the highest interest rate. Start with your highest interest credit card and concentrate on paying it off quickly. Pick your next highest card, and add the amount you were paying on the first card to the amount you usually pay on this second card in order to get this one paid down fast too. This is a valuable option that you can benefit from.
Debt consolidation is something that can help you financially, but this will only be the case if you’re making good decisions. Consider the pros and cons of different solutions, and make sure the debt consolidation strategies you use are adapted to your situation. Use the lessons learned here to help guide you through debt consolidation.