Debt Consolidation means taking out a more favorable loan top pay off several other debts. Most people opt for debt consolidation solutions to decrease the interest rate on their debt, to reduce their monthly payment amount or to minimize the number of parties they owe money to. Debt consolidation can be an effective strategy in some situations, but at times it can also make matters worse.
These debt consolidation tips can help you decide whether this strategy is useful for you or not:
1. Check Your Credit
Errors in your credit report can keep from seeking the debt consolidation help that you think you need. Review your credit reports thoroughly, check for errors, and correct if any. Request a free annual credit report from each of the three national credit reporting agencies; Equifax, Experian, and Trans Union.
2. Consolidate to a Low-Interest Credit Card
If you have managed to maintain proper credit, it’s time to look for a credit card that offers a low-interest rate. This way you can transfer high-interest rate credit card balances from different cards to a single card, and save on monthly finance charges while you pay down your debt.
3. Acquire a Loan from Your Local Bank or Credit Union
One of the best credit card debt solutions is to consolidate your debt by acquiring a personal loan from your bank or credit union. Do ask about the lender’s credit requirements before applying for a loan – do they require a minimum credit score to qualify for a loan?
4. Acquire a Consolidation Loan from an Online Lender
This option could be slightly risky; therefore you need to do a thorough background check before choosing an online lender for a debt consolidation loan. Find potential online lenders with the Better Business Bureau and check whether they have any complaints against them. It is essential to confirm that the lender is registered to do business in your state.
Watch out for lenders who promise to give you a loan regardless of your credit, or lender who charge a significant upfront fee for giving debt consolidation loan.
5. Sign Up for a Debt Management Plan
Seek help from a credit counseling agency for a debt management plan. A credit counseling agency can devise a plan for you where the agency pays each of your credit card lenders. You might also receive lower interest rates with a debt management plan.
For more tips and advice about credit cards and other financial products, visit Credit Card Solution.