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Debt Consolidation Tips
Americans are now saving less than at any time in our nation’s history, and the debt from credit cards alone averages nearly $10,000 per household. Here are some debt consolidation tips that will help you reduce your debt obligations.
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Debt consolidation suggestions
Once you accumulate a little bit of debt, it’s easy for it to get out of hand. A car loan, a mortgage and a few credit card debts add up and can easily overwhelm anyone, leaving many families with more debt than they can repay. Making matters worse is new bankruptcy legislation that will make it harder than ever for the average American to file for bankruptcy.
There are a number of things that a family can do to consolidate or reduce their debt:
- Inquire about a lower interest rate on your credit cards. If you have a history of paying on time, you may be able to lower your rate simply by calling your credit card company and asking them to do it. Sometimes they will and sometimes they won’t, but with the market for credit cards being as competitive as it is right now, they’ll often agree to do so. Keep in mind that a single late payment may cause your interest rate to go up again. It’s worth taking the time to call.
- If that doesn’t work, get a new credit card. Shop around for one with a lower rate, or just wait for one to come in the mail. Most Americans receive several solicitations for credit cards every month, and many of them feature low interest rates. Be aware that some of these rates are “promotional” and last for a limited time. There is no reason to be paying 25% interest on a credit card unless you just want to, and no one wants to do that.
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- Consolidate your debt using a traditional secured loan with collateral. You may be able to obtain a simple installment loan from your bank or credit union by placing cash or investments as collateral. As with a credit card loan, the interest on such a loan is not tax deductible, but the interest rate will be more favorable and it may allow you to consolidate several high-interest loans into one at a more favorable rate.
- Obtain a home equity loan or line of credit. If you have a home with some equity (the difference between the home’s value and the amount you still owe) you may be able to borrow against it. There are several advantages in doing this; the best of them is the fact that the interest on such a loan is tax deductible on loans of up to $100,000. Plus, these loans can offer interest rates of as much as 67% less than those offered by credit cards. It’s worth examining.
Most people can take advantage of at least one of the options above to consolidate their debt. Should none of these options be available to you, it might be to your advantage to speak with a credit counseling agency. Many of these agencies are nonprofit organizations and they can help you for a minimal fee.
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