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If you are finding it increasingly hard to repay your debts or you are paying too high an interest on your outstanding balances or loans, you may want to consider debt consolidation. Based on your specific financial situation, the debt consolidation method that’s best for you may vary. Let’s take a look at the best ways to consolidate debt
Ways To Consolidate Your Debt
- Personal Loan: A personal loan is an unsecured loan that allows you to borrow funds, without having to provide any collateral. The average interest rate for personal loans is a little above 9 percent, making it a cost-efficient way to consolidate your debts.
- Credit Card: You can also choose to transfer your existing balances and debts to a single credit card. This works best if you are able to find a balance transfer credit card with a 0% APR for a promotional period, so you are able to pay off your debt during this interest-free time.
- Life Insurance Policy: If you have a life insurance policy that builds cash value, you can consider borrowing against your policy. But, keep in mind that if you happen to pass away without repaying your loan, your beneficiary may not get any payout from the insurance company.
- Home Equity Loan: If you have enough equity in your home, you can also choose to get a home equity loan. Since this type of loan is secured by your home, it typically has a comparatively low rate of interest. However, borrowing against your loan is not without risk since you could lose your home if you fail to repay your loan on time.
- Credit Counseling Agency: You can also get in touch with a credit counseling agency if your debts are becoming unmanageable. The credit counseling agency will likely work with your creditors and consolidate the payments or reduce the interest rate, so the repayments become more manageable.
The Bottom Line
Remember that debt consolidation doesn’t wipe away your debt. While it’s okay to consolidate your debts, you’ll need to manage your new loan or credit card account responsibly and make it a priority to pay off your debts as per the agreed-upon terms.