Ways & How

how to consolidate debts

how to consolidate debts

Alarming interest rates and being confronted by debt collectors are a few of the major signs that you may need to consolidate your debts. Debt consolidation is the process of acquiring a bigger loan to pay off unsecured loans whether with a professional debt consolidation agency or on your own. How to consolidate debts can be helpful only before your many debts become out of control. There’s a need for careful study and research so that you can actually benefit from it. Here are some tips so you will not suffer from its pitfalls:

  1. Convenience and reduced interest rates are the selling points for most debt consolidation firms. Debt consolidators know that they have the power to renegotiate interest rates for mortgages and student and credit card loans. For these financial institutions, it’s better to be able to collect than to allow the debtor to be in default. So find a reliable debt consolidator that can lower your burden when it comes to interest rates and allow you to focus on the more important aspect of your life--which is to find a means to augment your income.


  2. People with assets can very well consolidate loans on their own. A loan made with collateral is called a secured loan. If you can manage well, a home equity loan is more beneficial because this loan is tax deductible. You just have to manage your funds carefully so that you will not be forced into foreclosure. Aside from having to deal with one creditor only, you won’t be harassed by debt collectors because your major loan is guaranteed by your house. The worst-case scenario is losing it only without the hassles of going to court hearings.

  3. Refinance your car to have extra cash for settling defaulted credit card balances. Replace them with credit cards with lower interest and transaction rates by researching and using Bankrate’s card search facilities.

  4. If you have a family member who is loaded with cash and there’s no problem getting an interest-free loan, by all means make use of it. Just make sure to pay your relative back in due time so that your reputation will not be destroyed and your relative’s trust in you will not be ruined. Taking out your retirement savings may be too risky because it can incur substantial penalty fees and taxes.

  5. When you know that you are not good with money, it is advisable to seek the assistance of a non-profit consumer credit counseling agency. They know the industry very well and are the best people to guide you in your quest to lower the interest rates on your credit cards. Just be aware that there are bogus credit counseling entities that can lure you into patronizing a consolidating service that will actually increase your liabilities in terms of interest on credit cards.

  6. Get acquainted with the National Foundation for Credit Counseling. They are highly recommended in the industry, and their fees are paid by the creditors themselves. They are motivated by incentives when they get debtors to enroll in a plan that they can keep up with. Their initial task is to aid people in debt to face the problem that is essential in getting them out of trouble.

  7. Beware of debt consolidators that are evasive when talking about fees and payment schedules. Never ignore your gut feeling when you are uncomfortable dealing with the debt agent. Move on to the next choice immediately.

Be dedicated in your intentions on how to consolidate debts. Being debt-free in the end will not only require debt consolidation efforts but changing your behavior to live within your means in order to be successful.


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