How to Consolidate Your Debt


Debt Consolidation is a term for a new/one loan to pay all your debt obligations. It consolidates multiple debts for one loan with fewer interest rates and time. In short, the amount you received from a new loan serves to pay off other debts.

Multiple debts happened when we have obligations such as credit cards, housing loans, personal loans, etcetera.

Types of Debt Consolidation
If you consider consolidating all your debts, then you got to make another decision. You have to decide what type of debt consolidation plan will you use. There are four main types of debt consolidation programmes, these are:

  • Debt Management Plan
Firstly, the debt management plan is not a loan. In this, you will have a credit counsellor and programs. They will help you managed and advised you on how to resolve multiple debts. The only drawback for this DMP is it takes several years to liquidate the debt because this depends on your resources. If you choose this type of plan, you must be patient.

  •  Balance Transfer on Credit Cards
The balance transfer is for credit cardholders. Also, it is best for smaller amounts of debts with a decent credit card standing. 

For this plan or programme, you will open a new credit card with a low-interest rate based on your card balance at a specific time. Mostly, the rate is 0% for an annum. When you transfer the credit card balance to the new card, pay the card forcefully before the accrued interest starts.

  • Personal Loans
A personal loan is a lump sum borrowed from an investment firm or savings institution. The lump sum is a pay-out after a series of payments to a firm.

Although a personal loan can serve a different purpose, use it sensibly. It has no bond, though. Financiers accept the loan through assessment if you have the paying capacity and budget that helps boost your credit score.

  • Home Equity Line of Credit
In this method, I want you to think a million times. It may have low-interest rates amongst the loan, but they will ask for collateral. That collateral is your house or home. Are you willing to give up your home in case you fail to pay? It includes tax deductions depending on your area, application fees and closing costs.

The home equity line of credit, also known as HELOC, since your house is the guarantee, as you pay back the unpaid balance, the total of the available credit is fill up. That means you can lend if you need to, and you can borrow whatever amount you want within the time frame.                          

How Does Debt Consolidation Work?
When you are consolidating debt, how does it work? The borrower, for example, will choose and apply for a personal loan through a bank or a lending firm. The lender may pay back the borrowers debts directly, or the borrower will get the cash to pay the other unpaid balances.

When the borrower pays her unpaid balances, that's the time she will make a payment for the new loan every month. In this way, it makes it easier to pay and manage your finances.

Debt Consolidation Requirements
The debt consolidation requirements depend on the bank or lending firm.  From what I've read, these are the four qualifications that most of them require from their borrowers.

  • Proof of income  
  • Credit history
  • Equity or a guarantee for the financiers of a bond or collateral for bigger loans

Life has its ups and downs. We may be facing ballooning debts but don't let this hinder you from looking for a good debt consolidation loan/plan. Fix it because these are all temporary.

Be careful in leaping any loan that you are qualified to pay your debt off.  

If you want to learn more about consolidating your debt, look no further, the Debt Consolidation team has the resources, tools and programs that will help you handle and administer your debt.

7 comments

  1. it can be very useful for people who have a debt. you make it sound very simple and easy to follow

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  2. Never get a loan if you are unsure to pay it in the future. loan consolidation will help you deal with a single institution for loan payment and restructuring.

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  3. Thank you for the great info, this is super helpful.

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  4. I think a debt management plan is most likely the best way to go.

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  5. This is great information! I hate going into debt, but sometimes it is a necessity. It's important to understand your options when managing debt.

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  6. Great tips for people to consolidate debt! Thanks for sharing!

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  7. This is great information. I try to limit how much debt I have because I don't want to be overwhelmed with it.

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