Home : Money & Time savers : Debt : Consolidating Debts – The In’s and Out’s

Consolidating Debts – The In’s and Out’s of debt consolidating

Are you finding yourself swimming in debt? You have too much debt? Too many bills coming in the mail every month and you don’t feel you are able to get any further ahead? Financially you need to get out of debt, and consolidating your bills is a way that you can do this without having to get a second or possibly third job. 

If you are carrying a lot of debt, a car payment, more than one credit card, student loans, loans on the furniture and other types of debt, you can find yourself with very little extra money after paying on your bills. 

Paying on debt and credit cards, and paying off debt that seems to flow endlessly into your mailbox is not always an easy thing. Consolidating your debts means you will have fewer payments to make, usually these payments are going to be lower than what you are paying now, and it will put more money back into your family budget every month as you are paying one bills instead of five or eight bills. 

If you have a lot of debt, one alternative is to take out a personal loan, pay off the debts, and not to incur additional debts until you have paid off the debts that you currently are paying on. 

On of the worst things that you can really do is to get a loan, pay off your credit cards, and then run up your credit cards again while you are working on paying off those old balances. Putting payments on top of payments on to your credit cards, your debt will continue to grow unless you quit spending. 

Those debt carriers who are able to take out a loan, pay off their debts and quit spending while they are making these payments on their debts will bring their balances down fast without interruption. If you are very careful you can pay off the debt that you owe to credit cards and such without much problem. If you are not careful you can end up with more debt that you might have ever had before. 

There are other ways you can plan to consolidate your debts. You can transfer balances between credit cards, and you can pay off a high interest credit card with a low interest credit card. The higher the interest on a credit card or a bill, the more expensive that bill really is over time. Pay off the highest interest cards and loans first. 

Another method of paying off those high interest loans and credit cards is to take out a home equity loan. A home equity loan is a loan against the value of your home. If you own your home, and you have a mortgage, you can borrow money on the value of your home, less the value of your mortgage.

Say for instance you have a $80,000 home, but you owe, $40,000. You can borrow up to 80% of the value of your home over and above the $40,000 so you could borrow about $24,000 by most calculations. 

Using a home equity loan, you can easily tap into money that you can pay off large amounts of money at one time, and generally, this is at a good interest rate. You can usually find your best interest rate at the bank that already holds your mortgage, or where you have your savings account established. 

If you want to have just one mortgage payment, without having to make a second home equity loan payment, there are also the options of refinancing your home, but taking additional money out when you ‘do this’. This type of option will lengthen the time that you have to pay on your mortgage in the number of years, or it can increase your payment for the same number of years, but you can still pay off a good bit of your bills and debt if you need to. 

People who are in debt will sometimes take out a personal loan to pay off debts. If you are going to do this method of debt consolidation it is important to make sure you don’t get more debt while you are still paying off what you have. 

If you are considering using a debt consolidation company, it is important that you don’t pay for their services. All types of non-profit debt consolidation and credit counselors exist, and it is in your best interest to seek out one of these types of companies. The non profit and no fee debt consolidation companies will help you without fees. 

Debt consolidation companies can help you lower your bills by making one monthly payment, but you also have to watch the interest rate that you are going to be paying on your bills and the money that you owe. 

Debt consolidation is not going to be the answer to improving your credit rating. Only paying off your bills is going to better your credit rating, so beware of companies that state they can improve your credit ‘right off the bat’ when consolidating your debts. 

What is the best solution for debt consolidation and getting out of debt? There really is no perfect solution but just various methods. What works best for you might not be the answer for another person. Explore the debt consolidation methods, make a choice, and put your plan into action without too much delay.