Seven Ways to Consolidate Your Debt
When it comes to debt consolidation the first thing you want to
do is consolidate your debt, but the first thing you should
consider are all of your options. There are in fact more options
and help out there than you imagined and just because you are in
debt does not mean the situation is hopeless so get up and take
charge of your credit rather than letting your creditors take
charge of you.
Debt Consolidation Tip #1 Renegotiate With Your Primary Lender
For some reason when individuals are in debt all they want to do
is avoid their lenders' phone calls rather than calling them and
trying to work out new terms and asking for some help. There is
help available and primary lenders will frequently offer
assistance or even renegotiate terms in the event an individual
is behind or struggling with payments. In this situation the
last thing you want to do is avoid your lender's phone calls
because this will only make the situation worse and negatively
impact your credit even more. What you want to do is immediately
call your lender or make an appointment when you know your
payment is going to be late or if you are struggling with
payments. Be upfront and tell your lender the situation and that
you want to renegotiate. This of course does not have a 100%
success rate, but since your lender will lose money if you
default they are more likely to renegotiate and grant you some
of the relief you need to make your payments. However, if you
never ask you will never know so go ahead and call your lender
and see if you can work something out. Making this your first
step may very likely negate any of the following steps if it is
successful. If not, then you have six more options to consider.
Debt Consolidation Tip #2 Non-profit Credit Counseling Agency
There are a wide variety of credit counseling agencies out there
including for profit and non-profit. If you are already in debt
and having difficulties meeting your obligations then you should
definitely seek out a not for profit credit counseling agency.
These agencies have helped millions of individuals get their
credit under control and will be able to help you as well. The
way these agencies work is you provide them with all of your
creditors' information and the agency calls and negotiates lower
payments and/or interest rates. Then you pay a fixed amount to
the agency each month and the agency divides up the payments
among your creditors. This will keep you on time with all of
your creditors and help you get your credit back on track.
Debt Consolidation Tip #3 Credit Card Transfers This is an
option for individuals who have good credit, but are starting to
become overwhelmed with their monthly fees as well as interest
rates. In this situation the individual should seek out other
credit cards with offers of no interest or extremely low
interest for a period of time. Then, once they receive the
credit card they simply transfer the full amount of their other
credit card's balance. This way the individual will avoid paying
the high interest, but for this to work the individual must be
disciplined enough to pay off the full balance of the credit
card in the introductory period of no or low interest. If not,
then this option will not be of much help. However, if you are
truly dedicated and committed it is an easy and fast way of
handling your credit problems yourself and avoiding paying high
interest rates.
Debt Consolidation Tip #4 Borrow from Retirement When completely
over your head in debt you always have the option of borrowing
from your 401(k) plan. Most employers will allow employees to do
this, however this should be one of your last options. There are
some drawbacks to this option, however. If you cannot pay the
loan back in full to your 401(k) or other retirement fund then
you will be charged a variety of fees and taxes by the IRS,
which is never good. Also, if you are fired or leave your job
the loan will be due immediately. In addition to this, the
interest is not going to be tax deductible during the time of
the loan. If you have a 401(k) plan and your employer will allow
you to take a loan from it, then you should do so as long as you
know you will be able to pay it back as quickly as possible.
Debt Consolidation Tip #5 Life Insurance You may borrow against
your whole life insurance policy as well. This option allows you
to take out a loan against the full value of your whole life
insurance policy and while there is no time limit in which to
pay the loan back you will certainly want to do so because if
you do not pay it back the total value of the loan will be
subtracted from your insurance benefits, which goes against the
reason you have life insurance in the first place. This is a
great option if you are disciplined enough to pay it back.
Debt Consolidation Tip #6 Home Equity Loans If you own your home
and have equity built up then you may qualify for a home equity
loan. This will allow you to pay off all of your debts
immediately, however you will still be required to make a
monthly mortgage payment. The drawback to this option is if you
cannot make your monthly payments you will risk losing your
home. Only consider this option if you are sure you will be able
to meet your monthly loan payment obligations.
Debt Consolidation Tip #7 Credit Unions Credit unions are
typical in the fact that they offer low interest loans. So, if
you are a member of a credit union see what options you have for
loans and their respective interest rates. This could be a great
way to get a loan with low interest rates and fees that will
allow you to pay off all of your existing debt and then pay a
low monthly payment on the loan.