When we first take on debt, we never plan on letting it get out of hand. And some people are able to keep it manageable. But others have a harder time keeping a handle on it. Sometimes it’s due to poor money management skills, and sometimes it’s due to unforeseen life circumstances. No matter what the reason, it’s just too easy to get into debt over our heads.
When you’re juggling debts from several different creditors, it can be difficult to keep up. It’s often hard to scrape up enough money to pay the minimum payment every month, let alone put any extra funds toward paying your debts off. If this situation sounds frighteningly familiar, perhaps you could benefit from a debt consolidation loan.
Consolidation loans are simply loans that are taken out to pay off several other debts. They’re often used to bring together the balances of several credit cards, but the proceeds may be put toward other debts as well. There are several benefits to getting a debt consolidation loan:
Debt consolidation can take on a number of forms. One of the most common types of debt consolidation loan is the home equity loan. Homeowners can borrow against the equity they have in their homes and use the proceeds to pay off high-interest debts. A home equity loan usually has low interest, and it can even save you money on your taxes since you can deduct the interest.
If your credit is in decent shape, you might qualify for a signature loan to pay off your debts. These types of loans have higher interest than a home equity loan, but it may still be lower than the interest you’re paying on your credit cards. When considering this type of loan, it’s important to shop around, because interest rates and terms vary significantly.
Another way to consolidate debt is by getting another credit card that has a low interest rate and transferring your balances. Some cards offer a zero percent introductory rate that lasts 6 to 12 months, while others offer a low balance transfer rate that lasts longer.
Consolidating your debt can make your life simpler and save you lots of money. But it’s crucial that you don’t take the opportunity to run up more debt. If you do use the cards you’ve paid off, pay the balance in full every month. That way you won’t have to go through the same thing all over again.