Consolidating Debt During Tough Times

If you're like many Americans you've begun to scale back your spending to help get a hold of your finances. While that's a good start it's often not enough to lower your debt by much if anything. But if you combine your new found thrift with some sensible bill consolidation strategies you could begin to pay down your debt even during these tough times.

  • Consolidate debt
  • Streamline payments
  • Lower minimums
  • Reduce principle

How will consolidating bills help to lower my debt?

Debt and bill consolidation isn't a cure-all for your financial problems but it can be an effective strategy for debt management and debt reduction. It involves combining several monthly payments to creditors on high interest debt into one place at a lower rate. So for example if you have five credits cards at 15%-20% APR you'd find a new card with a lower rate and use that to pay the rest off. This can decrease the growth rate of your debt, lower your overall monthly minimums and simplify your bills. If you can take the money that you save each month and apply it toward paying down principle on your debt than consolidation may be a good option.

When is consolidation a bad idea?

If you clear some credit cards by consolidating and you're only going to run them up again than don't do it! It's tempting to free up credit but you could wind up in a worse place than you are today. In these economic times we are all faced with the opportunity to learn something about ourselves. Are we going to continue to make the same mistakes we've made in the past or are we ready to start anew? Be honest; if you can't trust your self with more credit than don't take it on.

Your Consolidation Options

Debt Consolidation Loans - For homeowners there are many debt loan options including refinancing your mortgage, applying for a home equity loan or applying for a home equity line of credit. If you have other assets to put up as collateral you may be eligible for a debt loan from a bank or credit union. Borrowing against a 401K or life insurance policy are also options.

Student Loans - If you have a Direct Loan or a Federal Family Education Loan (FFEL) that is in delinquent you may be eligible for a Federal Direct Consolidation Loan.

Credit Card Consolidation - Even in today's climate many credit card companies will offer low introductory rates on balance transfers. Be sure to shop around for a low interest card or call some of the cards you already have and ask if they have any balance transfer offers.

So many Americans today are faced with the problem of stagnant or diminishing income coupled with growing debt. It will take some soul searching along with some new strategies and persistence to turn things around. Learning how to consolidating your bills can be a great place to begin.

Sources:
http://loanconsolidation.ed.gov/index.html
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