There is no one size fits all approach to dealing with debt in all of its forms. When we are saddled with the prospect of ever mounting debt, the stress alone can have a detrimental impact, but that is usually because people aren’t aware of their options in how to beat their own personal financial crisis. Debt consolidation consists of so many different things, and while one approach may suit someone down to the ground, it might not suit the next person. What are the best debt consolidation options available to most people?
Home Equity Loan
For homeowners who are struggling with their own debt, a home equity loan or a home equity line of credit is an option for you. You can get lower interest rates, and some larger borrowing amounts than if you were to get a typical line of credit, such as a credit card, but it does mean you are putting another mortgage on your home. In offering your home as collateral, this is a considerable risk, if not the riskiest form of debt consolidation, especially if there is a chance you could lose your home. The time to get another mortgage on your home can take a considerable wait and can be up to a few months.
Credit Card
Be careful with using credit cards to pay off your debts. First thing’s first, you need to make sure your credit score is in a good enough condition for you to obtain a credit card with a high limit. If your credit score isn’t up to muster, it’s best to take approaches to rectify this, and some services can help you monitor your score, such as MyFICO, this MyFICO review gives you some information on if it’s a suitable course of action for you. If your credit score is in good condition, it’s pretty quick to obtain a credit card, and it’s usually quite easy to increase your limit, as long as you are paying the minimum balance off the card each month. As a credit card is unsecured, there is a lot less risk involved, but you need to be aware of what is involved, which includes aspects like the APR. But if you’re using a credit card to pay off debt, it can backfire on you, especially if you choose the wrong card. It pays to do your research in advance.
Savings Accounts
It’s not the most sensible course of action to dip into your savings, especially if you are saving for something like retirement, but if you have excessive debt, spread over various credit cards and loans, the interest rates alone are going to cripple your monthly outgoings. So if you can use your savings to pay off your debt, you can at least use the money that you earn every month to pay it back into the savings. It’s not always the best course of action, but if you have high-interest rates, and you constantly feel in the cycle of debt, it’s best to pay as much as you can off while you can.
There are debt consolidation methods that are proving very popular, such as the snowball method, but these three options are worth researching.
