What is debt consolidation? Debt consolidation is a way of combining all your debts of high interests including the credit card loans and bills into a lower-interest payment. This is the ideal way to reduce the total debt amount incurred as well as structuring the payment of the debt faster and efficiently.
Consolidation is a bit different than refinancing, so make sure you understand the difference before getting down to it. In the following sections of the article, our experts have listed all the tips you need to consolidate your debt in 2019. For more information on consolidating, log on to Nationaldebtrelief.com.
Here is all that you need to consider.
Be sure of the lower interest payment
We are providing the ideal scenario for your benefit. If you are thinking about rolling the 5% or the 10% interest debts and consolidating them into the 10% interest loan, then you are doing it wrong. It has to make some sense before you get down to it. Do not go for consolidation offers that have rates close to the original debt.
Sell assets to clear your debt
Yes, this might sound a bit extreme, but there is no point in holding on to all of your possessions when you are already under the debt trap. Before looking into complicated avenues of debt repayment, why not sell some of your assets to clear the debt?
If there is an item like the other car or the property that you do not need, you can sell them and use the power of compound interest in your favor. Yes, you do have things that you value, but you might pay off all your debts if you plan it right. You can even hold on to the things that are of emotional value to you.
It is not about minimum payments on the debts
Many online articles and debt management experts point to the fact that at the very least the minimum amount should be paid for each mortgage per month. In case of student loans, if you just pay the minimum for each quarter, you will pay off your debt in about 20 years. So, you need to pay more than the minimum payment.
Avoid using the credit card for purchases unless you can pay back the full amount before the due date. There is no need to have a balance on your card for the credit score since the amount owed on loans make up for 30% of the score. Cut down on your spending in other areas and pay more than the minimum till you clear the debt.
How about refinancing or a different mortgage?
It sounds counter-intuitive to go for a second mortgage. But the fact of the matter is that a mortgage has lower interest rates. It is on any day of the year better than most of the loans you can avail. If you are lucky and do your research correctly, you will get hold of a mortgage with rates lower than the previous one.
This will enable you to pay off your debt faster. However, you need to keep in mind that there are penalties with certain mortgage companies in case the mortgage amount is paid earlier than the time-frame. In such cases, you are advised to ask for the second mortgage from the current lender.
Practice and become a credit card tart
Yes, it is a legitimate term. A credit card tart is a skilled individual who can transfer balances from one credit card to a second one while maintaining low-interest rates. There are various 0% interest cards available in the market today which can help you to manage your money and debts better. This is the ideal trick to cope with debts in the present day and age of plastic money.
It will take a lot of practice for you to become a credit card tart and it all starts by understanding the simple fact that new credit cards have low rates due to the introductory offers. At times the offer lasts for up to 2 years since the date of issue. When you transfer the high balance to a new card, you mainly buy yourself time to pay off the debt.
Negotiating a lower interest for the loan
If we get down to the nitty-gritty, details will undoubtedly emerge that will all point to the fact that you need to pay a lot more due to the interest on the credit cards. Our experts would like you to know that you can negotiate the interest rates just by calling up the credit card company. Yes, if you are lucky, the simple phone call will suffice. The trick is not to be afraid of any rejection. Yes, it is the firm’s prerogative to entertain your request or not, so keep your fingers crossed.
About unsecured loans
Unsecured loans are a last resort and are only used in case you do not possess a home or a valuable property item to leverage. If you have, you can consider the property for an unsecured loan. Unsecured loans are a bit risky in the sense that the rates are not favorable, but they will still provide a better bargain than credit card interest rates.
You can qualify with about 10% if your credit score is good. However, you need to keep in mind that the unsecured loans are all short term and you have to make monthly payments to make the scheme work.
About debt settlement
This is all about making a deal with the creditors, and in exchange, you make a single payment on your loan. The debt settlement will get handled by a third-party, and these settlement firms are responsible for managing the matter. This is the best way to ensure that you can stop those harassing calls from the debt collector.
Try every option before bankruptcy
Bankruptcy leaves a lasting effect on credit history as well as cause emotional distress. It is like having a criminal record that will cause you hassles before taking out any loan or line of credit. You need healthy financial habits to make sure you avoid certain debt-trap.
Pay-off your debt in a structured and ordered manner to experience the spring-board jump into financial freedom.