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Debt consolidation methods to help you pay your bills
There are a number of different ways to get yourself out from under a mountain of debt. In fact, there are enough different ways to do it that just about everyone can find a solution to their financial problems. It isn’t easy, however, and it will take time. If you have the will and the patience to get your bills paid off, you can do it. For details on how to do it, see below.
Read on.
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Debt consolidation can be accomplished in several different ways
Tens of thousands of Americans have financial problems, mostly due to their use and misuse of credit cards. Credit card companies make it way too easy to obtain credit, and few people pay any attention to such things as interest rates, minimum payments, and penalty fees until it’s too late. At that point, they are often up to their eyeballs in debt and don’t know how to pay the bills. A frequently tossed-about term for fixing such problems is debt consolidation. That’s fine, but consolidate the debt with what, exactly?
In a nutshell, debt consolidation is a simple matter of taking a number of different loans, often at high interest rates, and replacing them with a larger, single loan at a lower interest rate. Doing so reduces the number of payments that need to be made each month to one, and the lower interest rate helps keep the payment low.
How does one consolidate debt? There are several different ways to find a loan that will do the job:
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- Refinance your home and take cash out - If you are like millions of other people, you probably own a home that is worth more than you owe on it. It is possible to refinance your home completely for more than you owe. For example, if your house is worth $150,000 and you have an $80,000 mortgage, then you have $70,000 in equity. If you have $25,000 in debt, you could refinance the house for $105,000 and use the extra $25,000 to pay your debts.
- A home equity loan - Without refinancing the home completely, you could simply take out a home equity loan, or second mortgage against the portion of the home that you own. This will leave you paying two mortgage payments each month, but you will still have fewer bills to pay. As a bonus, the interest on this loan, even if used to pay bills, is tax deductible.
- Credit card balance transfer - If your credit is still good, you could transfer your debts to another credit card account. Many credit card companies offer low-interest incentives to new customers to transfer existing balances at low rates, some as low as zero percent. Be sure to read the fine print if you do this, as a late payment could trigger both penalty fees and higher interest rates.
- Personal loan - You could go to your bank and take out a personal loan and use the money to pay bills. Such a loan will have slightly higher interest rates than for a home equity loan, and the interest will not be tax deductible, but personal loans will still have lower interest rates than credit card loans.
Each of the methods listed above will work well if you have debt that you would like to consolidate. You should consider which method would work best for you.
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