If you have a hard time keeping track of your mounting bills or just don’t have the discipline to create a workable budget around a freewheeling lifestyle, a debt consolidation loan combines your debts into one manageable monthly payment, makes your life easier and leads you to financial freedom. Although home equity provides the easiest method to obtain such a loan, you can find other forms of debt consolidation without owning a home or using your home as equity.
A bank or credit union may offer you a personal loan on your unsecured debt. An unsecured loan means you are borrowing money on a promise to pay it back without a home or other form of collateral. Because this involves increased risk to the lender, however, interest rates are usually higher. The personal loan also depends on your credit situation and may require a co-signer. Your parents make good co-signers if they are willing, but you need to fulfill your obligation of paying the loan back because co-signers become legally responsible for payment if you default, bringing a lifetime of misery from Mom and Dad. You might be able to find someone else as a co-signer. Institutions usually offer unsecured loans on one- to five-year terms.
Debt Management Planners
Many companies specialize in debt consolidation plans. You can find them online or may notice them in print ads and commercials. These companies create management plans to pay down debt over a fixed term, based on your particular financial status. They also negotiate with creditors to help lower interest rates and waive fees. Debt consolidation companies charge nominal fees for counseling, developing plans and bargaining with creditors.
New Line of Credit
Credit cards offer a way of unsecured debt consolidation by transferring balances from your debts into one credit card when you open a new line of credit. Many credit card companies combine your debts with a low interest rate, but these rates may only last for a short time as an introductory offer. Despite how tempting or promising the offer, carefully check the terms and fine print of the loan conditions before entering into a new line of credit. Higher interest rates can occur over time, especially if you default on the terms of the loan.
Credit counseling organizations can advise you on working out your budget, depending on your financial situation. Many credit counseling services are no-profit, but some charge high fees. Try to find an organization that offers in-person counseling, the Federal Trade Commission recommends. A credit counseling agency may advise you to enroll in its debt management plan for a payment schedule on your unsecured debts.
Research and Effort
Many young couples choose debt consolidation loans because they don’t have the time or know-how to manage their various debts. Choosing the right plan, however, also takes some research and effort for the plan that fits best. Of course, once you make the right decision, the hassles of dealing with assorted debts lessen and you will feel a great sense of relief.
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