Debt consolidation reduces your interest rates and monthly payments so you can get a better handle on your credit. You can finance your consolidation through any of a number of lending companies. Once your promissory note is signed, pay off your accounts and focus on one monthly payment.
The Goal Of Debt Consolidation
The goal of debt consolidation is to reduce your payments through lower interest rates or longer terms. With smaller payments, you can start paying off your loan balance through extra principal payments.
You can lower your payments with two different approaches. The first way is to extend the payment period with a loan. Depending on the type of loan, you can choose five years or longer to pay off your debt. The other way is to search for lower rates. That way you can make the same monthly payment, but be out of debt sooner.
Financing A Consolidation
You have a number of ways to finance debt consolidation. Secured loans offer the best rates. So cashing out your home equity by refinancing or taking a second mortgage will give you the greatest advantage.
For those without property, taking out a personal loan can still get you a great rate. With online lenders, your application for $10,000 or less can be approved the same day.
It is also important to shop lenders before accepting a financing offer. Online financing quotes will help you find the best deal, saving you more on interest charges.
Making It Work
Once you have your funds, pay off your accounts immediately. Every day you delay, the more interest you are being charged. You can either write a check to your creditor or wire money to them.
The next step is to close accounts that you don’t think you will use. Unused accounts affect your credit score. Closing them will not wipe out your past credit history with the account. But it will reduce your open credit, which is a good thing for your FICO score.
This might also be a good time to evaluate your credit card rates. High interest cards should be the first to go. Also check to see if you can find better rates by opening a new card.
Once your accounts are handled, you just have to deal with one low interest monthly payment.
To view our list of recommended debt consolidation companies online, visit this page: Recommended Debt Consolidation Companies Online .
Carrie Reeder is the owner of ABC Loan Guide , an informational website about various types of loans.