3 Ways to consolidate and repay your debt

Are you finding it difficult to stay current on your payments? Do you wish to obtain low-interest rates and reduce your debt burden? If you're planning to get rid of debt quickly, you may consolidate high-interest bills into one affordable payment. Consolidation will help you to do away with harassment by creditors and collection agencies. In this article, you'll find an overview of the different ways you can consolidate and pay off bills.

What to consider when choosing right type of debt consolidation

How to consolidate your bills

There are 3 different ways to consolidate credit card bills along with other debts into a single monthly payment. An overview of each of the ways is given below.

1 Balance transfer

This option is specifically meant for those who'd like to consolidate credit card debt on their own. If one of your credit cards has a large credit limit and low-interest rate, then you can transfer your balances into this credit card. This will help in reducing your debt burden to some extent. However, prior to taking this approach, you need to read through the terms and conditions of the balance transfer.

If you take out a balance transfer card at low-interest rate (often at 0% rate) and transfer all your balances into the new card, you'll be charged a balance transfer fee. This fee is around 2-4% of the transferred balance. The 0% rate offer usually lasts for 6 months to 1 year. The 0% rate cards often come along with certain rules; for example, you may not be able to use the card for a purchase. Doing so, the 0% rate offer may become void and you may have to pay a high rate of interest on the card balance.

2 Debt/bill consolidation program

When you're not comfortable going for a balance transfer on your credit cards, you may seek professional help in consolidating your debts. You can go for an online consolidation service to consolidate your bills. Such services offer best bill consolidation programs which make it easier for you to pay off debt.
When you enroll in a bill consolidation program, a debt consultant reviews your financial situation and works with your creditors to bring down the interest rates on your accounts. This is to ensure that you don't have problems in making your debt payments. The best thing about a consolidation program is that it relieves you from the stress of managing several payments at a time.

3 Consolidation loan

With the help of a consolidation loan, you can consolidate your bills into one monthly payment. There are primarily 2 types of consolidation loan you can take out:

I. Personal debt consolidation loan

This is an option using which you can repay multiple bills (credit cards, payday loans, student loans, etc.) with a single lump sum payment. You can also opt for utility bill consolidation by taking out such a consolidation loan. A personal debt consolidation loan requires low monthly payments in comparison to what you pay on your bills.

II. Secured debt consolidation loan

These are home equity loans or lines of credit which you can take out keeping your primary or vacation home as the collateral. Such a loan can help you repay your debts with a large payment. But you need to have a good credit history and income potential to qualify for an equity loan or line of credit. Make sure you control your spending and save enough to make your loan payments on time. Otherwise, if you default on the equity loan, you may risk losing your home in a foreclosure.

Whichever way you choose to consolidate your debts, you need to avoid using the accounts which you're trying to get rid of. This will prevent you from adding on to your debt balance. Especially, if you have credit cards debts, it is better not to punch the cards when you've planned to pay off the debt. Just make the required monthly payments and repay debt within a definite time.

Last Updated on: Thu, 15 Mar 2018