“How do I consolidate debt?” is a phrase we hear every day. But have you considered trading in the high interest rates that you are being charged on your credit cards with a debt consolidation loan? Often by using the equity in your home as security, you can find that you could qualify for a better deal through a lower interest rate.
You will also find that you are able to consolidate debt by selecting terms that best fit your ongoing budget needs. By considering either extending the length of the loan for a lower payment or by shortening the length of the loan to get rid of the debt sooner.
Credit Card Consolidation
The first place to start is to total up your short-term debt. These will be things like your credit cards and store cards. Then make a list of the interest rates that you are paying on your cards. You may find yourself surprised how much interest is charged on them each month. The question whether to consolidate debt is then answered by seeing what better deals are out there compared to your current arrangements.
With these numbers in front of you, you now need to find out what type of debt consolidation loan would be best for your own personal circumstances. If you are already on a low rate mortgage, getting a secured loan may be another option. Otherwise, considering a remortgage can often get you a better deal for most of your borrowing.
As well as your credit card consolidation requirements you may also have other secured and unsecured debts. Car loans, loans taken out when you purchased furniture, and other loans taken out at a time when the interest rate was not your primary concern. The same process should be taken with these as you did with the credit cards: could you get a better deal by wrapping these up in to a loan secured against your property?
The Warning When You Consolidate Debt
It is vital that you get the best advice when looking to consolidate debt. To know whether it is best advice for you is the number 1 thing to consider.
You should find that by securing debt against your property you will be offered better interest rates. But by taking unsecured debt and putting it against your property has its own issues should you fall behind in your payments. Additionally, taking debt that could be paid off over a short period of time, if funds permit, and swapping it on to a better rate over a longer period of time, also needs to be discussed.
What to do next
Speak to us at Loansmart and we will be able to quickly assess what options work for your own situation. Helping people to consolidate debt is something that we have many years of experience in.