Are you digging out ways to get rid of debts? Well, then, consolidating debts can be the best option to use when repaying debts. As you might know, that debt consolidation means combining multiple debts into a single payment. So, there are many ways in which you can do so have a look at these smart options and make a choice.
5 Wise ways to Consolidate your Debts
1) Utilize the Balance Transfer Approach:
The reason why a balance transfer method is used by many is because it has the potential to lower interest rates. So, if you use several credit cards, you can easily transfer all the balances to the card with the lowest interest rate.
But do remember that transferring debt isn’t the same as repaying.
When you execute a balance transfer method, you pay off credit card “A” with a new credit card or an existing credit card “B”. For the suitability of the debtors, many credit card companies offer 0% or low rate promotions to pull in new customers, which means that for a set period of time, you will have to pay no or very low interest on your balance.
Advantages of the Balance Transfer Approach
- Transferring balance can only reduce your monthly debt payment, allowing you to save or pay for other things.
- It simplifies the process of debt repayment.
You will have to pay a substantial amount of fee, anywhere between 3% to 5% of the total amount.
2) Take out a Personal Loan:
Normally, applying for a personal loan is usually the best way to consolidate debt without hurting credit. In simple words, a personal loan is an unsecured loan where you don’t need to provide a collateral. The lender permits to issue the loan after looking at your credit history and other important credentials. If you have a good credit then that in itself suggest that you are qualified for a personal loan.
Advantages of a Personal Loan
- If you have a good credit, your personal loans will come at a lower interest rate.
- It is relatively easier to take out a personal loan.
If you don’t have a good credit score, you might have to pay higher interest loans on your loan.
3) Consolidate Through a Home Equity Line of Credit:
HELOCs are considered to be a favourable finance option for those who have huge debt to pay off. Just because the line of credit is backed by a collateral, your house, the interest rate could be lower.
Advantages of HELOCs
- Consumers with a large amount of debt can benefit from HELOC by consolidating the debt and paying them off.
- With a HELOC, a consumer may easily reduce his/her monthly payments due to lower rates and long repayment terms of the new loan.
You should apply only if your job and income are secure so that you can repay the HELOC.
4) Borrow Against your Retirement Plan:
Instead of opting for a specific type of loan or a new credit card, another option that you can try is to borrow from your retirement plan to repay debts. The retirement plan follows a simple procedure where you use the savings, that is already there for the retirement, to repay your debts.
Advantages of a Retirement Plan
- Easy to qualify for the loan.
- It has a simple repayment strategy.
Make sure that your retirement account is not drained out while paying the money for debt. Also, pay back the amount to enjoy your golden days.
5) Opt for Cash-Out Refinance:
Cash-out refinancing is considered to be one of the best ways to consolidate unsecured debt and pay them off. If you own a property, you may look forward to Opt for cash-out refinancing at a lower rate and utilize the remaining amount to pay off your debt.
Advantages of Refinancing the Mortgage
The best advantage of cash-out refinancing is that a lower rate means lower monthly payments, which suggest that you will have to pay less for your home and use a considerable amount to repay unsecured debts. : Refinancing helps people with adjustable rate mortgages to convert to fixed-rate loans.
Be careful of paying back the amount within definite time to avoid losing your home.
Debt consolidation can be a savior to many of the existing debt problems. So, the bottom line is that consumers should be well-versed with the types, which can make the debt repayment easier. If you select any of these options wisely, you are bound to get the immediate results.