As people from all over the world examine their financial situations, they find that they owe more than they can pay. Because credit cards have such high interest rates, borrowers can barely handle the minimum payment, much less make progress toward paying what they owe. Fortunately, there are many debt consolidation solutions which allow borrowers to finance debt at lower interest rates, consolidating high-interest balances into one easier, cheaper package.
Borrowers who consolidate their debts make progress, and find convenience. Because payments from multiple creditors are grouped together, under a low interest rate, borrowers will pay down their principal, instead of hacking away at interest only. Additionally, instead of sending multiple payments to multiple creditors, borrowers will make one single monthly payment.
One option is to tap home equity. Borrowers may choose either a HELOC (home equity line of credit) or a home equity loan. A HELOC is a credit line, which allows borrowers to cash out their equity to pay off higher-interest debts. A home equity loan, on the other hand, gives the borrowers a lump sum payout, which may be used to pay off debts. Both options tend to have better interest rates than credit cards, but failure to make payments on a HELOC or home equity loan may place borrowers in danger of losing their homes.
Borrowers may transfer balances to zero-interest credit cards. Many credit cards offer teaser zero-percent interest rates, encouraging customers to transfer their high-interest balances to these zero-percent cards. However, borrowers who transfer balances must make sure to make payments on time, and to keep current with their payments. Otherwise, the teaser interest rate will be erased, and will climb to a much higher percentage.
Another choice for borrowers is the debt consolidation loan. Borrowers may take out a personal, unsecured loan (meaning no collateral) to pay off their high-interest debt. To be sure they are getting the best deals, borrowers should calculate their interest and fees on all of their credit card accounts, to guarantee that the consolidation loan actually lowers their rates.
Any method for consolidating debts will require borrowers to do research. Borrowers should compare their options, and choose the option with the cheapest interest rate, the best amount of risk, and the most feasible repayment term. Borrowers must obtain multiple quotes for HELOCs, HELs, credit cards, and personal loans, before making a final choice.
Seventy percent of people end up with the same debt load after two years of consolidation. This means that borrowers should only take out loans if they are at the end of their credit rope, and if they?re sure that they?ll be more disciplined. Borrowers must not feed the reckless spending and careless repayment tendencies, which got them into trouble in the first place.
Borrowers do not have to have stellar credit to obtain loans for debt consolidation. Borrowers simply have to choose lenders who specialize in servicing customers who have a poor credit history. Borrowers have many options for attacking their financial troubles, including tapping home equity, transferring credit card balances, and obtaining consolidation loans.
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Source: http://get-rid-of-debt.net/money/credit-cards/debt-consolidation-alternatives-for-worried-borrowers/
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