How To Consolidate Debt
Want to learn about how to consolidate debt? For many Americans, debt can be one of the most daunting problems to solve, often throwing other aspects of life into chaos. 9 out of every 10 Americans are living with some sort of debt, and with the economy in one of the most difficult periods in recent history, managing that debt has only grown more impossible. If you're one of those Americans living under the burden of debt, knowing how to consolidate debt is a huge step in the right direction. Taking the steps needed to consolidate debt can lower interest rates, eliminate late fees, and put you on a more firm financial footing.
- Calculate your debt. The only way to deal with a problem is to confront it honestly, no matter how unpleasant it may be. Debt is one of those topics that many people want to avoid, as confronting a negative financial situation evokes feelings of shame and insecurity in many people. In order to consolidate debt, you need to know exactly what you owe, and how much trouble you're in.
- Know your credit score. Very often, those with severe debt issues will also have a low credit score, and fail to qualify for certain consolidation programs. Beware of programs labeled as bad credit offers. There are numerous programs out there designed to help those who have poor credit consolidate debt, but the interest rates are so high that the debt actually grows while participating in the program. The same caution applies to taking out new loans to repay debt. Studies show that over 70% of those who take out a loan in order to pay debt face a larger debt within two years.
- Attempt to negotiate. One of the major reasons that lie behind uncontrollable debt is high interest rates. Borrowing money always comes at a price, and the more you need that money, the higher rate you're likely to pay. Those financing options geared towards those with credit issues, like bad credit loans or credit cards, come with rates as high as 50%. There's currently legislation being passed to keep lenders from charging these exorbitant fees and interest rates, but in the meantime, negotiate with your credit card company. If they refuse to lower your rate, do not use the card for future purchases.
- Think outside the box. If you're looking for ways to consolidate debt, there are often solutions you haven't thought of yet. Borrowing from an insurance policy or retirement account can often save you thousands in interest payments and late fees, so if you have money accessible, it's best to borrow on your account and pay off your outstanding debts. Another option is to refinance your home or car. None of these options is pleasant, but it will help you deal with your debt, so you can then concentrate on replacing the borrowed amount. Before deciding to borrow on an investment or refinance, make sure you learn about any applicable interest rates or fees. Ignoring these things is likely what got you into debt in the first place.
If all other options fail, there's always the opportunity to enter a debt consolidation program. There are a number of non-profit agencies out there that are designed to help you consolidate debt, and they can often negotiate to get you lower interest rates. Before you commit to anything, though, make sure you're able to pay the agreed amount every month, as failing to do so can have negative consequences. Debt doesn't have to be a debilitating issue, as long as you take charge of it, and are proactive in acknowledging and managing your debt.
Orman, Suze. "The Laws Of Money, The Lessons Of Life." Free Press, 2003.