Debt Consolidation | What are your options?

Constructive Ways To Consolidate Your Debt Part 1

Are your debts weighing you down?

I wouldn’t assume that you are burdened with debt, but America’s population consumes more than any other country on earth when it comes to water, oil, and of course retail merchandise. Do you have a bill or two that seems to be holding your head under water once in a while? If so, this article may help you breath more freely and comfortably.

Managing debt can be a long, slow, and tedious process, especially if you have to juggle multiple debts at the same time. By using debt consolidation tactics, you can put all your debt under one umbrella and save a little on those pesky interest payments in the long run.

When is it time to seek debt consolidation help?

Seeking help when it comes to personal debts can be a little humbling for some and many feel too embarrassed to seek out the appropriate help in times like these. Unfortunately, its this pride that will cause further peril the longer you wait.

A good time to seek debt help is when you experience the following;

* You can only afford the minimum payments on your credit cards each month.

* You begin to accrue debt to catch up with previous debts. An example of this would be using your credit card.

*You write checks from one account to make a payment on another for lack of necessary finances.

*You are near or have maxed out your existing credit limits.

*You may have picked up extra hours at work or took on an extra part time job just to make ends meet.

*You find yourself using credit just to buy groceries or fill your tank.

*You have just lost your job and don’t know how you are going to make due on your payments.

If any of the above criteria seems to match your current circumstances you will want to begin thinking about what you can do to manage your debt before it gets out of control. Here are a few options,

Credit Card Transfers

This option may be available to you if you have upstanding credit. The credit card industry is a very competitive business and will usually provide balance transfer options to new subscribers that will provide you with a 0% interest rate for the life of the transferred balance just to have you as a customer. If you’re lucky the approved balance will allow you to consolidate more than one if not several of your other accounts. By only having to pay the minimum balance on that which was transferred, without further finance charges, you can focus on paying off other existing debts.

Home Equity Loans

This is perhaps the most popular form of debt consolidation. If you currently own a home with some equity, you can refinance the mortgage to pay off your debts and if you’re lucky you may even get a lower interest rate while you’re at it. What makes this option the most attractive is that it spreads your payments out over thirty years. This gives you some immediate relief and ties all your debt into one payment with your mortgage.

Retirement Funds

If you currently possess a 401k or retirement account, you may be able to borrow a loan against it. This should be a last resort for consolidating your debt as your 401k is meant to secure your long term financial future.

The nice thing about these types of loans is that you are paying interest to yourself, not the bank. Be aware however that if you quit your place of employment that is providing you with the 401k, your employer will expect full payment of the debt before you leave. If you choose this option you may be tying yourself down for awhile so be sure that this is something that you are willing to do.

Personal Loans From Family or Friends

This option I would consider carefully before proceeding with as well. Family and money don’t always mix very well, and it can potentially ruin your relationship. However, if you feel you are close enough with a rich relative or family member you may be able to get an interest free loan. If that doesn’t work and if they trust you enough you may be able to provide them with a money making opportunity by paying them an interest rate (cheaper than your current best options of course) for the use of their money.

These are just four ways to manage money that you can use to help consolidate debt. Stay tuned to the blog tomorrow and we will cover a few more in “Managing Your Debts Through Debt Consolidation”

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