Although you may not remember it by this point, getting into debt can be fun. Credit card shopping sprees, a brand new car, name brand medications– all of those expensive luxuries of life may not have seemed so expensive or even luxurious at the time, but you probably enjoyed buying them. Unfortunately, trying to dig your way out of overwhelming debt is never fun for anyone, and it can be one of the most difficult experiences of your life.
Every aspect of life becomes harder once your debt reaches a certain, and not only the financial parts. Relationships can become strained; your mental and physical health may suffer; you become so stressed that it is impossible to enjoy things that you used to love; and so many additional problems can arise that only make each situation worse. When debt and financial troubles get to this point, you will look for any option that can possibly relieve it.
The Basics of Debt Consolidation
One such option that has worked for some is debt consolidation. If you have struggled with your debt for any amount of time, you have likely heard the term before, although most people are not sure exactly what it is. In recent years, predatory lenders, irresponsible personal use and general misconceptions have led to debt consolidation gaining a negative image in the mainstream consciousness, but it can actually be a life-saver for those who need it and go about it properly.
There are a number of different techniques and strategies available for debt consolidation, and some are more complicated than others. However, the basic concept behind debt consolidation is relatively simple, no matter what technique or method you use. It involves taking out one large loan in order to pay off all of your current debts, and it can be the most helpful tool available for getting out of overwhelming debt.
The Benefits of Debt Consolidation
You should be able to take out a debt consolidation loan that has a lower interest rate than most or all of your current unsecured debts, and this can significantly reduce the overall amount you will have to pay. In addition, a debt consolidation loan will be for a specific period of time– usually between three and five years– and this can lower your monthly payments by spreading the amount owed over a longer period.
When done correctly, debt consolidation will reduce the amount that you are required to pay, sometimes substantially. It will also greatly simplify your financial life by reducing several bills with various due dates into one monthly payment, a benefit which is not to be underestimated for those who struggle with late fees. When used in conjunction with effective credit repair strategies, debt consolidation can also decrease or eliminate damage to your credit.
The Options for Debt Consolidation
The available options for debt consolidation will depend upon your credit, financial circumstances and other similar factors. If your credit has not been too badly damaged by your debt problems, you may be able to take out an unsecured loan at a bank or credit union. Or you could perform a balance transfer onto a credit card with an introductory 0% interest rate, as long as you pay it off before the introductory term expires.
Homeowners have the unique option of taking out a home equity loan, and those with retirement accounts or life insurance could borrow from them. Even those who do not have these options available could still obtain a debt consolidation loan from one of the many online lenders that are designed specifically for bad credit debt consolidation.
Like Us? Sign Up!
Subscribe to get the latest budget buzz via email.