Debt Consolidation: You Have Options

Our economy is driven by consumer credit, including unsecured credit card debt. Most consumers have little difficulty obtaining credit and are unable to resist offers with high credit limits and low interest rates. No one expects to default on loan or bill payments, but if they suffer any type of unexpected event such as divorce, death, medical issue or a job loss, they may face a financial crisis. What should a consumer do if they are facing a financial crisis? Debt consolidation may be one option. Debt consolidation allows consumers to combine various high interest debts into one lower monthly payment which has a lower interest rate. Several debt consolidation options are available which can help consumers consolidate or restructure their debt payments and pay down their debt balances. Under certain conditions, the following debts may be consolidated: * Unsecured personal loansrn* Bank credit cardsrn* Department store credit cardsrn* Medical billsrn* Legal debtsrn* Old utility billsrn* Tax debts Debt consolidation options include: Home Equity Loan Home equity loans may allow homeowners, who owe less than the value of their home, to take equity from their house and use it to pay-off their higher interest debts. Using a home as collateral will allow the homeowner to get a loan with extended repayment terms and a lower interest rate. A home equity loan usually offers excellent terms, but the homeowner may risk losing their home if they fail to meet the terms of the loan. Debt Consolidation Loan Debt consolidation loans consolidate smaller debts into one larger loan. This approach offers convenience to the consumer and allows them to make one loan payment to one creditor, versus many payments to different creditors. Debt consolidation loans are not secured by collateral, and the interest rate may be much higher than a home equity loan. Shop around at various banks and credit unions to find the best debt consolidation options. Zero Percent Credit Cards Zero percent credit cards may allow consumers to transfer credit card balances to a card with a zero percent interest rate. The zero interest rate is only temporary and this approach requires discipline. Consumers should pay as much of the balance as possible during the no interest period, prior to the interest rate adjustment. Review the terms of the credit card. After the zero interest rate term expires, your rates could be substantially higher. Keep in mind, if you miss a payment, your interest rate could go from zero to the default rate (which is usually over 20 percent). Debt consolidation can be a great option for consumers who have high level of unsecured debt. Get informed about your options. Educating yourself about the different types of debt consolidation could be the first step to becoming debt free.