Consolidation Options

You have several avenues you could pursue to consolidate your debts. We'll explain the pros and cons of your options here.

Accessing the Equity in Your Home

If you have problems with debt and also own your own home, then you might consider a home equity loan to consolidate debt instantly. A home equity loan takes the difference between your home's value and the remaining balance on your mortgage and gives it to you in the form of a low-interest loan. In order to pursue this option, you must have built up sufficient equity in your home. On the up side, home equity debt consolidation gives you exceptionally low interest rates and the added bonus of income tax deductions for the loan's interest. On the down side, if you fall behind on this kind of loan, you could lose your home. For most, that is too much of a risk to take to consolidate debt quickly.

Balance-Transfer Offers

You probably get offers daily for new credit cards that have low-interest balance transfer features. Perhaps you have an existing credit card that offers low interest rates on balance transfers. Whether you use a new card or an existing card, a balance transfer involves moving the balances of your other cards onto one card, usually with a lower interest rate. This makes payments more convenient because you only have to make one instead of several. Similarly, you can save money on interest because balance transfers usually have very low rates. However, these rates will not last forever. Most introductory balance transfer offers only last six months to a year. For this reason, this is not the best long-term option for those who want to consolidate debt instantly.

Personal Loan

Another way to consolidate debt instantly is to take out a personal loan with your bank or credit union. Though the interest rates of personal loans are not as low as those of home equity loans, the rates are usually still more reasonable than those of most credit cards. If you consolidate debts with a personal loan, you will take the money the lender gives you and pay off your credit cards or other debts. Then, instead of making payments on many high-interest debts, you make one payment each month to your bank or credit union. One drawback to a personal loan is that you might need to provide collateral, such as your car or another piece of property.

Professional Consolidation

Hiring a professional service is probably the most efficient way to consolidate debt instantly. A debt consolidation company will have already arranged lower interest rates with most major creditors before you even become a customer. That means as soon as you sign up, these low rates will be applied to your debts. All the consolidation service has to do is reference their rate sheet to determine the rates for your particular creditors. In this way, the actual consolidation process is very quick. The consolidation company will calculate what your new payment is, and you will then make that payment each month to your service. The consolidation service will then divide the payment among your creditors.

If you have any unanswered questions so far you may find the answer in the frequently asked questions.