Paying off your debt can prove to be difficult when you have different credits by different lenders. It is hard to know which debt to prioritize when they all have different deadlines and interest rates. Debt consolidation allows you to combine all the payments and make one single payment for all your loans. It is beneficial for people with lower incomes and savings
Here are some few ways you can use to consolidate your debts and reduce your financial strain.
Consolidating debt through a specialized company
There are a number of debt consolidation companies which help reduce the amount of rising consumer debt among people. The main service they provide is debt consolidation. In this service, you receive debt management advice. The company will pay off your debt and transfer all the debt to their side. This is good because all the interest cost and late payment policies of the other loans will get of your back.
The money you pay to the debt consolidation companies often has lower interest rates and is paid back in monthly instalments. At the end of the payment period, you fins that you have saved more money than if you could have worked with your creditors. If you have a poor credit, you will not enjoy the benefits of a lower interest on your debt consolidation plan
Credit card Balance transfer consolidation plan
If you have credits on several credit accounts, it’s going to be difficult to pay them back individually. If they are not from the same company, they all have different interest rates and deadlines, which can be confusing. You can solve this issue by transferring all your credits into one main card with zero interest rates charges.
This method is effective to clear your balances only if you commit your finances and lifestyle into repaying the loan. When credit companies give you a credit transfer, they offer you a 6 to 8 month period to repay the loan. When you use the method to clear the credit, ensure you pay within the timeline to avoid penalties.
Home equity consolidation plan
A home equity is taken out of the equity in your home and used as collateral. For this to work, you must have a good credit and a large amount of equity in your home. Your home is now responsible for your credit card debt.
A home equity consolidation plan is a secured loan. You can get up to 80% of your home’s value. The issue with this plan is, the values of your home keeps fluctuating so the loans do not have a fixed term. The best thing about taking a home equity consolidation plan is the lower interest rates.
Personal loans as a consolidation plan
You can use a personal loan as your consolidation plan if you can borrow enough money to pay all your debts. Personal loans are unsecured and have fixed monthly payments. Personal loans are meant to be paid back in a fixed amount of time.
You can take up a personal loan and use it to consolidate your debts. If you have a low credit rating, you will have a difficult time getting approval for the loan. a personal loan will cost you more in the long run