When overwhelming debt is threatening to bury you, your best option may be to consolidate your debts. Consolidating your debts can have many financial benefits, including giving you a lower interest rate on your debt, extending the amount of time that you have to pay your debts and reduces the number of payments that you must make each month. There are a number of different ways available to help you consolidate your debts and each method has different benefits associated with them. Here are some of the most common methods used to consolidate debts.
Credit Cards With Introductory 0% Interest
One of the most popular methods of consolidating debts is to transfer the debts to a credit card that has an introductory interest rate of 0% for the first few months that you hold the card. Using this method gives you a chance to pay off your debts without having to worry about interest charges being added to the balance. Be careful to pay off your debts before the introductory period for the credit card expires or you will owe interest for everything that was charged to the credit card dating from the time the account was opened, which negates all of the benefits of using this type of card for debt consolidation.
Low Interest Personal Loans
Another way to consolidate your debts is to obtain a low interest personal loan and use the loan to pay off your debts. A personal loan allows you to obtain a large chunk of money at a low interest rate that can be used for whatever purpose you wish. These loans also let you extend the amount of time that you will be paying off the debt, typically requiring equal payments for several years before the loan is completely repaid. Many people like using this method to consolidate their debts because they can budget their finances around the payments because the payments will remain the same for the life of the loan.
Withdrawing Equity From The Home
A less frequently used move for consolidating debts is tapping into the home equity of your home or taking out a home equity line of credit to pay off the debt. This method is only recommended if you are relatively young, are not planning to retire soon, and have a lot of equity in your home. Hopefully, you are not carrying enough debt to put a large dent in the equity for your home, but even if you are, tapping the equity in your home is much cheaper than paying the sky high interest rates that the credit card companies are charging you.