Debt Consolidation - 5 Ways To Consolidate Your Debt

These days, with the average person having at least three credit cards

, a car loan, and a mortgage, it is easy to see why people get overwhelmed with financial problems. An illness or job layoff can cause you to quickly fall behind on your payments. Soon you're receiving collection letters, nasty telephone calls and even higher interest rates. Luckily, there is a way you can get yourself out of this less than desirable situation. Debt consolidation can provide you with a viable solution to your problems. There are several different ways you can do this, and since each situation is different, one solution may be better than another.

There are pros and cons to each of these methods and you'll have to do your research to find out which debt consolidation option is right for you and your situation. Don't be afraid to ask questions and seek debt consolidation advice from financial experts.

1. Credit Card Balance Transfer: If you have more than one credit card, and most people do, you can try transferring all of your balances onto one card. Ideally this card will have the lowest interest rate of all your cards; but even if it doesn't, you will only have one payment to make, instead of three or four. The key is to not use any of the other cards anymore.

2. Home Equity/Line of Credit: You can borrow against the equity that you have built up in your home, or take out a line of credit. The difference between the two is that an equity loan is a closed account that has a fixed amount that gets paid off over a period of time. The line of credit is more like an open-ended revolving account that you put money into, and can borrow against when needed, much like a credit card.

3. Borrow from Your Retirement Funds: This is probably not the most desirable option, but if you make a commitment to replace the funds, can be a good debt consolidation solution. There are some stipulations and drawbacks to this method, so get some debt consolidation advice before using this method. If you're going to be charged a hefty fee or penalty, then it may not be worth it.

4. Debt Consolidation Loan: These are used for the sole purpose of consolidating debt. You can get a loan from your bank or credit union; or, you can seek out a debt consolidation company. Be forewarned, however; many of these companies charge extra fees that can make the actual loan amount much higher. Do your homework and make sure that you deal with a reputable, legitimate company.

5. Borrow from Your Life Insurance Policy: Like your retirement funds, this is usually not the most viable option, but if your only other choice is bankruptcy, you may not have any other choice. You can usually borrow up to the cash value of the loan/policy, and use the funds to pay off your debt. Again, make a commitment to pay back whatever you borrow.

by: Aiden Caleb

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