Easy Ways to Consolidate Your Debts

Debt has indeed become a grave problem for an increasing number of people in the US. Running on several hefty debts is quite a common thing; and more common is the ubiquitous stress and loss of peace, which mark the lives of the debt-stricken consumers!

Are you similarly struggling with multiple debts, which are spiraling out of your control? Are the variable interest rates on your debts devouring a large portion of your income? Is every buzz of your phone causing in you a sense of alarm, lest it is a debt collection call? Brooding over your fat debts will hardly help; it is time you consider debt consolidation services option and simplify your debts!

With debt consolidation, you can merge your several existing debts into a single obligation, which you pay off at a fixed lower interest. Here are some of the simple ways to get your debts consolidated:

1. Take out a HELOC : If you own a house and it has considerable equity on it, then you can consider a Home Equity Line of Credit or a Home Equity Loan. You can take out these by keeping your house as the collateral against the loan. Home equity line of credit (HELOCs) is a revolving line of credit that lets you draw checks up to the total credit limit. Most HELOCs allow you to drawn on the credit for up to ten years. Home equity loans are like HELOCs except the loan is a cash lump sum drawn at a single go and you pay it off over a fixed time. You can use the HELOC or the Home Equity Loans for paying off your existing debts. And it will leave you with a single liability towards the repayment of the HELOC. Most HELOC loans come at a very affordable interest, which makes your repayment easier.

2. Collateralize your assets : If you owe some other asset such as car, boat, motorcycle, landed property or even jewelry, you can use them as collateral and take out a loan against it. Then you can use the proceeds to pay off your present liabilities. Since the collateral provision lowers the interest on the loan, you liability towards the loan becomes less stressful.

3. Borrow against insurance : If you have a life insurance with cash value, you can borrow money against the policy and use it for the repayment of your debts. Borrowing against insurance is usually advantageous. Typically, the insurance company charges a nominal interest rate and you can take your time to repay the loan. If you cannot pay the amount, then simply your borrowed amount plus the interest will be deducted from the sum payable to the beneficiary.

4. Borrow from 401(k) plan : If you have a 401(k) retirement plan, then you can borrow up to 50% of the account's value, or $50,000, (whichever is smaller), and use the proceeds for your debt consolidation. Interest rates on 401(k) loans are usually cheap but you need to repay the loan within five years. If you leave your employment without repaying the loan fully, the outstanding balance becomes payable immediately. So, you should repay your 401(k) loan before you leave your job.

5. Consider balance transfer : It is a great way to get your credit card debts consolidated. Choose one of your credit cards with lowest interest rate. If you have not reached the maximum limit on that card, then you can transfer a number of high interest card balances to this card and pay off the balance as fast as possible. Once you pay off the balance, repeat the process with the remaining high interest cards, and pay off all your credit card debts.

6. Sign up with a debt consolidation company : Now, if the above debt consolidation options do not seem to fit your situation, then the best way is to hire services of a professional debt consolidation company. Make sure you go for a company affiliated to the BBB or any other pro-consumer group. You will need to sign up with an upfront fee. On signing up, the company will take charge of your debt issues and carry out the entire consolidation program by negotiating with your creditors. It will also devise a monthly payment plan within your budget, which will require you to make a single monthly payment to company. And in turn the company will make payments to your creditors from that sum. The process will continue until your obligations are paid off totally!

Debt consolidation can be an excellent way to solve your debt problems without having to risk your credit score greatly! In fact, it is the only debt relief option that harms your credit score minimally; the reason being that, with consolidation you pay off the entire borrowed amount and it is extremely advantageous when it comes to credit score improvement.

So, just gear yourself up, choose the consolidation option that suits you best and pave your way to a happy and peaceful debt-free life!


Author Bio :

The article is a guest post by BG, who is an IAPDA arbitrator associated with Oak View Law Group. It focuses on some easy debt consolidation options, that can be useful for consumers who find themselves nose deep in multiple debts.