10 Steps To Successful Debt Consolidation
If you're having trouble balancing your income
and expenditure due to large debts then read on and find out your options in
credit card debt consolidation.
Debt consolidation can be a wonderful option when
you find your finances getting out of control but before you go out and sign up
for a debt consolidation loan there are a number of things you must take into
account.
1) Why are you looking to consolidate debt?
The basic principle of debt consolidation is that
you take out a single loan and use that loan to repay all your existing credit
card debts, loans and overdrafts.
This normally results in lower payments generally
spread over a longer term. Before you proceed with debt consolidation you
should first consider whether there's a better alternative.
2) Sell assets to clear your debt
Rather than rescheduling your debts see if
there's any way you can repay some or all of your debts yourself. Sell unwanted
valuables and other items.
Depending on the item you can sell to dealers,
advertise in local classified ads, or through eBay. Sell unwanted books through
Amazon. If your debts are very high and you own your house consider downsizing
to release equity.
3) Pay more than the minimum off your credit cards.
If you can pay more than the minimum monthly
payments you should seriously consider continuing along with your existing
credit cards and clear the debts over the next 12 to 18 months.
While it may mean restricting your spending in
other areas it'll be the cheapest option future. in fact, you may still prefer
debt consolidation to make managing your debt easier.
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4) There are a number of options when considering debt consolidation:
If you're currently only just managing to pay the minimum monthly payments on your credit cards, or your total credit card debt is increasing monthly then debt consolidation may be the right choice.
5) A mortgage or re-mortgage
If you own your house the lowest interest rates
are obtainable by taking out a new mortgage to pay off your existing mortgage
(if any) plus enough funds to repay you other debts.
If repaying your existing mortgage will result in
penalty charges consider a 2nd mortgage with your existing lender. The interest
charged will probably be slightly but not significantly higher.
6) take out a secured loan with another lender
If you have already missed or been late with any
payments, and as a result, your credit score is too low for your mortgagor,
consider a secured loan with another lender.
Secured loans in these circumstances are more
expensive and the lenders are quick to repossess your home if you miss
payments. Only take this route if you're certain that you just can make the
repayments.
Depending upon how bad your credit history is, so
long as you maintain all of your payments for the following 1 to 3 years, you
can replace this loan with a mortgage or re mortgage once your credit score
improves. there'll be penalties however if you repay a secured loan early. make
sure you read the fine print.
7) A loan secured on other assets
If you have an expensive car, boat, or plane
you'll probably be ready to obtain finance using these assets as security. the
rate of interest will be higher than a loan secured on the property. If you do not
have property or it's fully mortgaged securing a loan on other assets may be an
option.
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8) An unsecured loan
If you do not have property or other assets an
unsecured loan is often an opportunity. An unsecured loan is usually over a
shorter term, normally up to a maximum of seven years but occasionally longer.
As a result, the monthly payments will be higher but the debt will reduce
quickly.
As the lender has no security your property and
assets are less at risk if you default. The lender could, however, send in the
bailiffs if they obtain a court order.
Because there's no security expect to pay a
higher interest rate, particularly if you have a poor credit history.
9) Don’t forget the credit card option.
If your debts are relatively low and you still have
an affordable credit history applying for another card with a 0% or low
interest balance could be an alternative to a debt consolidation loan.
Go for a 0% balance transfer if you can
realistically repay all or most of the debts in the 0% balance transfer period.
If however, there'll still be a substantial debt at the end of the balance
transfer period choose a permanently low interest rate.
Be aware there may be a 2 – 3% charge on the
balance transfer. to make sure you don’t slip back into debt cut up all your
credit cards and close paid off accounts.
10) Check all the options before making a decision.
As you research all the options it'll quickly
become clear if there's one obvious solution. for many individuals, there'll be
more than one option so it's essential to check all of them out before making a
final decision. go to a range of different lenders and mortgage or loan brokers
and obtain the best package for you. Remember you have the final say and just
enquiring doesn't commit you to any course of action.
For a great many people debt consolidation provides a perfect solution to excessive credit card debt. sorting out debt problems takes a little time, effort, and determination. Once you’ve sorted your debts you'll find life more enjoyable and relaxing and, with no debt collectors calling or contacting you by post or phone, much less stressful.
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