Digging yourself out of debt is stressful, particularly when you have multiple bills to pay-off. Trying to juggle everything at once can get you nowhere.
A debt consolidation loan can be a good way to go instances such as this. However, a number of factors must line up perfectly in order to benefit from this strategy. If a traditional consolidation loan won’t work for you, here are some smart debt consolidation alternatives to consider.
1. Transfer your Balance
This is a great option if you can get a balance transfer card that has a credit limit, which can accommodate the current balance you’re transferring over. It should also have an annual percentage rate (APR) that’s reasonable enough for the transfer to be worth it. Search for a balance transfer card that has a beneficial interest rate.
A good transfer card should come with a very low interest rate for up to 18 months. you are lucky, you may even find a company that offers a zero-interest rate for a certain period.
This is a great debt consolidation option; however, you should try to pay off the balance before the introductory rate expires on the new card. This can prevent you from building up a heavier debt on your name. Search for a great credit card balance transfer calculator to help you plan your payments accordingly.
2. The Home Equity Loan
Your home equity represents the difference between the assessed value of your house and the amount you’re indebted to on your mortgage. If you happen to be a homeowner with sufficient equity and a healthy credit record, you will be able to use some of that equity at an affordable price.
Many home equity borrowers make use of this money so that they can pay off debt with a steeper interest rate like credit cards.Home equity loans provide you with a lump sum at a fixed rate. It can be your ticket to freedom with debt consolidation.
3. Peer to Peer Loans
There are quite a few platforms that support something called peer-to-peer loans. Like every other loan, there is a limit on the amount you are allowed to borrow (for instance, they can range from $30000 to $50000). Peer-to-peer loans are unsecured, so you must ensure that your credit history looks okay. This will determine your interest rate, limits and other fees you may incur. If you have a good credit score, then you are likely to pay a lower rate on interest.
Alternatively, you can borrow the money from an actual peer or family member. If you can find someone who is generous enough, it could save you lots of time and extra money.
In a Nutshell
When borrowing money for debt consolidation, avoid lenders that specialize in borrowers with lower credit ratings. These lenders often have hidden fees, offer higher interest rates and less than desirable loan terms. Research the debt consolidation options thoroughly. Ensure that your lender runs a genuine company. Look for the relevant certifications or check the reviews online. This will prevent you from getting into unnecessary trouble.
Information sourced by the author for luxuryactivist.com. All content is copyrighted with no reproduction rights available. Images are for illustration purposes only. Featured Photo by Dziana Hasanbekava from Pexels