Debt consolidation has become a widely publicized trend, and many consumers have taken advantage of combined monthly bills and lower payments. There are many reasons to consolidate credit card debt. For starters, a consolidation affords easy credit management. Secondly, unsecured debts are combined into one loan, which equals one monthly payment. Finally, credit card consolidations makes becoming debt free a realistic and achievable goal. Because of numerous available options, there are many ways to consolidate credit card debt.
1. Home Equity Loan or HELOC
Even though homeownership is not a requirement for consolidating credit card debt, owning a home and having enough equity will make the process a little easier. Both home equity loans and home equity lines of credit allow homeowners to borrow money against their home's equity. In essence, the home will act as collateral for the loan. Although the two options have strong similarities, there are differences in receiving the funds. Homeowners acquire home equity loans as a one-time lump sum, whereas home equity lines of credit are made available in the form of a revolving credit account. Once the funds are accessible, the money can be used to consolidation debts.
2. Consolidate Credit Card Debt with a Balance Transfer
Aside from owning a home, establishing a good credit rating has its advantages. Individuals with an excellent credit score may qualify for a credit card balance transfer. This option allows consumers to combine multiple high interest credit card balances onto one card with a lower interest rate. If approved for a zero percent interest balance transfer, consumers will pay "same as cash" for a designated time frame. Because of no interest payments, credit card balances are reduced faster.
3. Debt Consolidation Personal Loan
Debt consolidation loans secured by your home's equity are the easiest to acquire. On the other hand, many financial lending institutions will offer debt consolidation loans and accept other forms of collateral. For example, you may apply for a loan using a free and clear car title, electronics, jewelry, or other pieces of valuable property.
Individuals with perfect credit may get approved without collateral. These are called unsecured debt consolidation loans. The interest rates on unsecured loans are a few percentage points above secured loans. Nonetheless, fixed loan terms and rates lower than most credit cards make unsecured loans an appealing option.
4. Non-Profit Debt or Credit Counseling Service
Non-homeowners with low credit scores have fewer options. Still, these persons can also experience the feeling of living debt free. Debt consolidation or credit counseling agencies offer a range of debt elimination strategies to assist persons with limited options. These services do not approve or offer loans. Rather, debt management companies renegotiate terms with current lenders. Through diligent communication with creditors, these services work to get interest rates reduced and late fees waived. Debt management services consolidate credit card debt by acting as the middleman. While participating with the program, all monthly payments are forwarded to the agency. In turn, the agency will pay the creditors. Debt repayment plans vary. Individuals with smaller debt amounts can become debt free within two years, whereas some programs have a seven year repayment plan.