Getting out of a sticky debt situation can not only be difficult, but stressful and frustrating as well. One way to avoid bankruptcy and simplify your debt repayment is through debt consolidation, according to the Federal Trade Commission. With debt consolidation, you take all of your individual debts---such as student loans, credit card debt, personal loans and lines of credit, car loans---and consolidate them into one debt held by a single financial institution. This can make payments easier and possibly lower your interest rate overall.
Prepare and Consolidate
Step 1
In order to get a debt consolidation loan that makes sense in terms of your interest rates, you need a decent credit score. Even a few points on your credit score can make the difference between getting a prime and below-market interest rate. There are many things you can do to improve your credit score, such as checking your credit report to make sure there are no inaccuracies that might hurt your score. Spend as much time as you can making on-time payments and negotiate with your creditors to pay down as much debt as you can. Many creditors will often settle for less than you owe them if you have failed to make payments on your debt in several months and offer to send cash immediately.
Step 2
Many people who own a home are able to use the equity from their house to use as a line of credit in order to consolidate their debt. If you don't have enough equity in your home to cover your debts, some financial institutions will use your home as collateral, according to the FTC. If you don't own a home, you might consider taking out a personal line of credit at a bank or other financial institution, such as a credit union. Most places will require a good work history and sometimes you can have more luck trying a locally owned bank or credit union, as these types of institutions rely on local business to make money. If you can find a good enough rate, you can also transfer your debt balances to a credit card, provided you can get a high enough line of credit.
Step 3
There's no point to debt consolidation if you're paying more in interest for all your loans. Once you've decided what type of consolidation loan you will select, shop around for a good rate. Credit cards often have some of the highest of all consumer debt options, but you may be able to find an promotion with a low rate online or at a local bank. Consider all of the options in front of you, and take into consideration fees, penalties and other factors of the loans you are shopping for.
Step 4
Once you have shopped around and been approved for a loan, you'll either receive a check for the amount of your loan, or your financial institution will contact all your creditors to pay off the balances. If you have a check in hand, resist the temptation to spend any of it, as this will keep you from paying off your full balances and only get you deeper in debt. Pay off all your debts in full and make on-time payments for your new consolidation loan. With hard work and discipline, you'll be out of debt before you know it.
Tips and Warnings
- Talk with a financial adviser who can best assess your needs and abilities before taking out a consolidation loan. They may be able to steer you in the best direction for your situation.
- Beware of phony consolidation companies and scams promising easy consolidation, according to the FTC. Often, these companies will charge you incredibly high interest rates and only exacerbate your debt problems. Only take out loans from well-established financial institutions, such as credit card companies, banks and credit unions.
Things You'll Need
- Decent credit score
- Access to credit
Member Comments
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freedamiles October 19
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Bankruptcy
freedamiles October 19
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Bankruptcy
jhon0001 October 20
How Debt Consolidation Overview Getting out of a sticky situation of debt can be not only difficult, but stressful and frustrating. One way to avoid bankruptcy and simplify your debt through debt consolidation, according to the Federal Trade Commission. With debt consolidation, you take all your separate debts --- such as student loans, debt, credit card, personal loans and credit lines, auto loans --- and consolidate a debt that is held by a single financial institution. This can make payments easier and possibly cut interest rates in general.
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Bankruptcy
davidmilr October 21
Getting out of debt is a difficult situation not only can be difficult, but stressful and frustrating as well. One way to avoid bankruptcy and to simplify the repayment of debt through debt consolidation according to the Federal Trade Commission. With debt consolidation, you take all the individual debts --- as student loans, credit cards, personal loans and credit cards, auto loans --- and are secured by one of the debt held by a financial institution. This can make payments easier, and possibly lower the interest rate as a whole.
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Bankruptcy
davidmilr October 21
Getting out of debt is a difficult situation not only can be difficult, but stressful and frustrating as well. One way to avoid bankruptcy and to simplify the repayment of debt through debt consolidation according to the Federal Trade Commission. With debt consolidation, you take all the individual debts --- as student loans, credit cards, personal loans and credit cards, auto loans --- and are secured by one of the debt held by a financial institution. This can make payments easier, and possibly lower the interest rate as a whole.
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Bankruptcy
davidmilr October 21
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Bankruptcy
davidmilr October 21
This is a wonderful blog and wonderful information,given here
i love blog and i like it..
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Bankruptcy