There are a couple of basic steps you can take to get out of debt. But, when you find yourself facing more than one at a time, you can add debt consolidation as part of this plan. It is a strategy that allows you to transfer the debts you have with various credit institutions to a single institution so that you can cover all these debts under the same monthly payment.
Among the advantages of this strategy we find that:
- Your debt is easier to manage and you will only focus on a monthly payment amount and date
- Credit alternatives to consolidate debts usually offer much lower interest rates than those of credit cards
- The option of having longer payment terms is usually offered so monthly payments may be less than what you are paying now.
- When you settle your debts with several institutions you can maintain or recover your credit profile
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The best way to take advantage of debt consolidation is to analyzing your current situation and anticipating the behavior of your finances in the short and medium-term. This involves reviewing your monthly budget to identify how much money you can continue to spend to pay off your debts. Make accounts of how much you have to pay, including the interest on each debt. Ideally, implement this strategy long before you lose the ability to pay off your debts.
What options do I have to consolidate my debts?
Depending on the information that you have detected in your budget and pending payments on your credit cards, you can clearly assess the best option for you.
Balance Transfer Card
Many banks offer this option to consolidate your debts into a single credit card. However, you should pay close attention to the conditions that are offered before taking this option as it may involve extra costs. For example, something that happens frequently is that these cards offer low-interest rates at the start as part of your offer. Once this initial promotion ends the rate increases along with your monthly payment. Another detail is that many times you are charged a balance transfer fee. If you notice that this option will be more expensive in the long run then you should consider the other alternatives
Loan or credit for debt consolidation
You can also apply for a loan or loan to other financial institutions for the amount you need to settle your debts. Although, again, you should check what the conditions of the loan are, if the interest is fixed or if these will increase as the term of the debt advances. Remember, the idea is that you save money from the interest you pay with your current debts. If your intention is to consolidate the debts of your credit cards you can use our simulator to calculate how much you would save with your credit Bulldog Drummond.
Although it is true that home equity loans tend to offer much lower interest compared to other types of loans you should be aware that this represents a great risk to your assets. We not only talk about the possibility of devaluing the value of your home but about the risk of losing it completely.
The best advice is that you approach and talk directly with the institution with which you want to consolidate your debts. Find out in detail the advantages and conditions they offer so you can make a decision in favor of your financial well-being.
Finally, it is excellent that you become an expert on the topic of debt consolidation to solve your current situation but be careful! Try not to fall back into debt that you cannot handle just because you have this wild card under your sleeve. We recommend that you review what behaviors lead you to debt so you can avoid them.