When things get out of hand, especially when handling your finances, you’ll need help from trusted debt experts to help you get back on your feet.
It can be all too easy for some types of debt to swell to the point it’s hard to make your monthly payment. This is especially true for unsecured debt such as a credit card. That’s because credit card balances that carry over cause you to pay interest on interest.
The result is debt that quickly snowballs to the point that minimum payments are tough to swing each month. Making matters worse, the higher payments do less and less to decrease your balance, trapping you in a nearly inescapable financial situation.
Fortunately, there are debt relief options if you start to feel yourself losing control over your financial future due to increasing monthly payments on existing debts. Sometimes achieving a lower monthly payment is as simple as credit card balance transfers. Other times, it might make more sense to consolidate your debt with a loan.
So what do the debt experts recommend when you think you might need to consolidate debt?
Debt Management Plan
There are some financial circumstances that simply won’t work for certain debt consolidation options. For example, depending on the most recent activity on your credit report, you might not qualify for a debt consolidation loan with a low enough interest rate to save you money each month.
Similarly, you might not qualify for a balance transfer due to your credit score or having insufficient credit line limits.
In these types of situations, one debt relief option is to enroll in a debt management plan. These are often offered by nonprofit credit counseling agencies and debt relief companies like Alleviate Financial Solutions.
Debt experts at these organizations work on your behalf to create agreements with lenders that help you get back on track financially. While these programs are certainly helpful for thousands of people, they could also impact your rating with the credit bureaus.
Taking Out a Debt Consolidation Loan
One alternative to using a credit counseling agency or debt management program is a debt consolidation loan. Most folks choose a debt consolidation loan to consolidate credit card debt. That’s because interest rates on credit card bills are often far higher than the typical consolidation loan.
Debt consolidation loans are structured with simple interest, meaning your payment doesn’t fluctuate from month to month. This also means you won’t have to pay interest on interest anymore, either. Compared to credit card debt, simple interest loans are far superior.
Debt consolidation loans are somewhat easier to get than personal loans because the lender knows they’re helping you improve your finances. However, this could also mean the lender might require you to close the accounts you pay off.
A drawback to this demand is that you could lose the credit score benefits that come with having open accounts with a long track record of on-time payments. So, be sure to check the details when going this route.
Consider a Balance Transfer Credit Card Offer
If you’re seeking the easiest option for credit card consolidation, a balance transfer might be for you. The benefit to this method of consolidating debt is you might be able to get a lower interest rate, if not zero interest, for a limited amount of time.
Sometimes these offers last six months to a year, which could be enough time for you to drastically reduce your balances to a manageable level. Depending on the credit limit of the card you’re transferring to, you might be able to roll multiple cards into a single account for the simplicity of one monthly payment.
The drawback to this option is that it usually requires a relatively high credit score to get the best offers. You’ll also need enough room on a card to be able to move multiple accounts over. Still, if you’re paying a very high-interest rate even on one card, this is a great option to try first.
Pay Off All Your Debts with a Personal Loan
Personal loans are one option for people who want to consolidate a wide variety of existing debt. When you have multiple debts, it can make it harder to keep up with bills, especially when it’s unsecured debt.
Unfortunately, you can’t transfer the balance of auto loans onto a credit card for a low-interest offer like the one mentioned above, but personal loans offer an alternative.
Essentially, you take out a loan with terms that provide an affordable monthly payment at a low-interest rate, then pay off your existing debts. Then, you’ll only have to deal with one fixed monthly payment that you can budget for.
If you have a solid credit history, you might be able to get an interest rate that’s much lower than your unsecured loans, auto loans, or even student loans. These types of loans are typically found at banks and credit unions but can sometimes be found online as well.
Home Equity Loan
Home equity loans are great for homeowners with significant equity in their homes. Much like personal loans, either a bank or credit union is a common source for this type of loan. A major benefit to these types of loans is they have some of the best interest rates.
Also, you might be able to deduct the interest on your taxes each year, which you definitely can’t do with credit card debt, auto loans, or a typical debt consolidation loan.
Although there are some tremendous financial benefits that come with home equity loans, be aware that some come with variable interest rates. That means your monthly payment could fluctuate.
Typically, the interest rate on these loans is tied to a specific index, such as the LIBOR. This provides some degree of stability but is something to keep in mind. Also, if you can’t make the payment on a home equity loan, you risk losing your home.
The Best Debt Consolidation Loans
When you’re unsure whether a debt consolidation loan is the smartest option for your financial situation, Alleviate Financial Solutions is here to help. Reach out to our team to speak with one of our debt experts.
Whether you need a debt consolidation loan or debt settlement, our team of seasoned debt specialists can steer you in the right direction. Call us at 800-308-2935 at Alleviate Financial Solutions today!