What is the Smartest Way to Consolidate Debt 3?
If you’re finding it hard to manage multiple debts or want to reduce credit card debt faster, considering debt consolidation could help. There are various methods available such as personal loans, balance transfer credit cards and enrolling in a debt management program – each has different approaches that could work for you.
Here’s everything you should know about each option.
1. Use a Balance Transfer Credit Card
Credit card debt can be stressful. It can be easy to run up balances when buying things on impulse, only to struggle paying them back once your bill arrives in the mail. A new year provides an ideal opportunity to assess your finances and consider if debt consolidation could help alleviate some of that pressure.
Balance transfer credit cards offer an introductory period with low or zero-percent interest on balances being transferred over. This can be an effective way of consolidating multiple debts if you can clear them before the introductory offer runs out, though keep in mind that many balance transfer credit cards come with an initial fee that ranges between 3-5% of what is being transferred over.
If you’re considering using a balance transfer credit card to consolidate debts, compare fees and interest rates across lenders to find the ideal option for your situation. To make things simpler, submit soft credit prequalification applications with different lenders without hurting your score; Experian’s CreditMatchTM tool makes this easy and quick.
Another means of debt consolidation is taking out a personal loan. These types of financing options are usually provided by banks, credit unions and online lenders and depending on your credit history and financial circumstances; you could qualify for one with significantly lower rates than what’s offered on credit cards; however if your credit rating falls below average it could prove challenging to secure such an unsecured personal loan.
No matter which approach you select, it’s crucial to understand why and how your credit card debt arose in the first place. Consolidating won’t fix the problem if your spending outpaces earnings; as well, creating and sticking to a budget are vital parts of paying down credit card balances.
Once you’ve chosen your method of debt repayment, it’s time to begin. To stay on track and stay within budget, a debt repayment calculator may come in handy as a reminder. Also be sure to pay your bills on time as late payments could void introductory interest rate offers that you may have taken advantage of. With some hard work and perseverance, debt-freedom should soon follow! Good luck!
2. Apply for a Home Equity Loan
Debt consolidation can help make managing multiple debts simpler by consolidating them into one monthly payment, potentially saving on interest costs while making repayment easier and making managing finances simpler overall. It could save money in interest charges while making debt management simpler too!
Home equity loans are an increasingly popular means of consolidating debt, as homeowners enjoy lower loan rates than with other forms of personal debt consolidation such as unsecured credit cards or personal loans. Since your house serves as collateral against such secured debt loans, failing to keep up payments could potentially result in the loss of your property. It is therefore crucial that if payments on such a loan become arrears you pay promptly or risk the possibility of foreclosure proceedings being initiated against it.
Before using a home equity loan to consolidate debt, it’s important to assess how much home equity you possess. This can be calculated by subtracting your current market value from what’s owed on your mortgage and using an online calculator as an estimate of this figure. You should also carefully consider your intended purpose of using the funds from this loan as lenders may ask this before issuing it, with potential borrowers signing an affidavit agreeing that they will use them accordingly.
Consolidating your credit card debt using a home equity loan could be the ideal solution if your house has enough equity and the interest rate on this type of loan is less than average for the type of debt that you’re carrying. To know whether this option is suitable, tally up all outstanding debt, then compare this rate against average rates on credit card accounts that you have.
The best way to reduce debt is to pay down existing balances on each account, whether through using a credit card with 0% APR for an introductory period or enrolling in a debt management program through a credit counselor. You should also try tightening up your budget by cutting expenses and living within your means – this will help prevent you from going into more debt in the future and staying on top of payments throughout 2019 will keep your creditors at bay! Have a happy New Year!
3. Look for a Debt Consolidation Loan
Your money could be better used on retirement savings, emergency savings and education costs instead of paying interest and fees on various debts. A debt consolidation loan might be just what’s needed, if your monthly payments have become difficult to keep up with; but first it is essential to understand your current financial position first and calculate your Debt-to-Income Ratio (DTI). Use a budgeting worksheet or calculator for this or use our application tool online if that works better for you.
Once this step has been taken, it’s time to compare your options for debt consolidation. There are various lenders offering personal loans and credit unions specializing in providing loans to low-income customers as well as online lenders – you should carefully examine their rates, terms, fees and prequalify online without impacting your credit score.
Make sure that the type of debt consolidation loan you apply for qualifies as well. Not all lenders accept everyone, with most needing at least excellent credit to lend to those applying – if this doesn’t match up, work on improving it before trying again later.
As part of your search for a debt consolidation loan, it’s crucial that you compare APR and repayment terms across each option you are considering. Furthermore, make sure no lenders charge prepayment penalties before choosing one that offers the ideal combination of terms and cost for you.
Debt consolidation loans provide many advantages, the primary one being having only one monthly payment to make rather than several. But be wary – if your new debt consolidation loan requires longer payments than existing ones, you could end up spending more overall as fees or charges may accrue that would have otherwise gone away without consolidation.
No matter which debt consolidation method you select – balance transfer card, personal loan or home equity line of credit – it is vital that you adhere to your payment plan. By making timely payments you can ensure your debts are cleared off on schedule, while helping prevent more expensive ones in the future.