With all the access to money that modern financial systems afford us, it is not strange that most people are unable to manage their finances and very easily slip into debt. Luckily, these same financial systems have remedies for those who find themselves in debt by offering ways out.
Debt consolidation is one of the tools that can help a debtor find his way out of debt. Through debt consolidation, a debtor is able to bring together all the debt under a single roof, so to speak, so that payments are to a single creditor.
Below you can find some examples of how you can consolidate your debt if you find yourself in such a position.
1. Credit consolidation
Credit consolidation loans allow you to put all your debt especially credit card debt under a single credit card. The best option is usually to consolidate all the credit card debt under a single card with the lowest interest rate. If you can manage to get a new credit card through a promotion, you could even benefit by getting a zero interest rate on a card for a number of months.
2. Personal unsecured loans
If you have a good credit score, it is relatively easy to get an unsecured loan from a financial institution. Better yet, the lower your credit score the better the interest rate you can get.
With access to such a personal loan, you could secure this loan in order to be able to pay all other loans that you have. This will leave you with a single loan that has a lower interest rate than all the other loans.
3. Enroll for a debt management program
Through a debt management program, you could also manage to pay up all your debt. This option is most preferable if you have little experience with financial management and find that yourself overwhelmed by all the nuances of debt management.
Ideally, with the guidance of a credit counselor, you should be able to learn how to manage your finances in a better way. The debt management system may seem very harsh to some people, but it is an important asset if one is fully committed to getting yourself out of debt.
Another advantage of a debt management program is that it could actually improve you credit score if you stick to the plan.
4. Refinance your secured loans
You could also opt to get a loan through refinancing a secured loan that you already have. For example, if you have taken out a mortgage, you could use the same facility to get additional financing with your house as collateral.
If you have access to such a loan, you could refinance in order to pay all other debts that you have and remain paying for a single loan that has a much lower interest rate.
You should ideally do this if you are sure that you can make the payments for the loan. If you can do so, the advantages can outweigh this risk. Home equity loans usually have a very low interest rate and a long period over which you can pay up the loan.
With an improved change of attitude towards financing, you will be able to solve all your financial issues without compromising your credit score and the most important aspects of your life.