Many of us fall on hard financial times at some point in our lives and it can become exceedingly difficult to stay on top of multiple loans and repayments. When you are in financial trouble, it can be easy to end up with many different credit cards, all with different payment dates. If your debts are growing out of hand, then you may want to consider debt consolidation as a means by which to manage your debts.
What is Debt Consolidation?
Debt consolidation can be highly beneficial for those who have multiple different loans for various things such as credit cards, healthcare and personal loans. It involves combining all of your debts into one more manageable loan, often with a lower interest rate.
How Could It Help You?
Having one singular payment date makes it immeasurably easier to pay off your debts, as you no longer end up getting penalised for missing your payment dates when you can’t stay on top of them. As well as this, if you have a lot of debts with high interest rates, then you could stand to save money by adopting a lower interest rate with a debt consolidation loan. It also allows you to handle your monthly outgoings with greater ease, as you know exactly how much you have going in and out of your account without having to do complex math.
What Types of Debt Consolidation Loans Are There?
There are various different types of debt consolidation loans, which can be broken down into four main categories, each of which is suitable for a particular circumstance. Here are the four key types of debt consolidation loan:
- Credit Card Balance Transfers
If you have multiple different credit card balances on the go, then a credit card balance transfer allows you to combine them into one single card. This involves getting a card with a high credit limit that is capable of holding all of your debt in one. When taking this method, you may be able to take advantage of low introductory rates, although you should always check when these are likely to go up and by how much in order to ensure that you will not get stung. Credit card balance transfers can, unfortunately, result in bad credit, but so long as you pay off your balance regularly then this is not irreversible.
- Debt Consolidation Loans
These are loans which are offered by credit unions or banks solely as a means by which to combine your debts. In some cases they will have a lower interest rate, whereas in others they are utilised for their convenience despite a higher interest rate. Check out Debt Fix loans for debt consolidation, who offer a free consultation to allow you to pick the path that works best for you. This option saves the effort of trying to consolidate your debts by yourself.
- Home Equity Loans
If you are a home-owner then you may be able to utilise a home equity loan to help deal with your debt. This involves using your property as collateral for your loan. This option should only be taken if you are confident that you can afford your repayments, otherwise you could risk losing your home.
- Personal Loans
Personal loans involve borrowing enough money to cover all of your debts and then paying back the single loan in monthly instalments. Often for those with bad credit, they will not be approved for a personal loan or may be subject to extortionate interest rates, so it is not the ideal solution.
When handled correctly, debt consolidation can be a powerful tool in saying goodbye to debt for good. It is best to consult a professional service who will be able to provide guidance on how best to go about it.