Keeping yourself financially afloat isn’t easy, especially when you have debt knocking at your door every month. Luckily, you have some options to help keep more money in your pocket and shrink your debt until it’s gone. Once you’ve tasted financial freedom, you’ll never want to go back.
Step One: Do Your Math
Before you take any steps toward debt consolidation, you must first identify your spending habits and determine how much you are able to afford to pay each month. Taking a long, hard look at what you tend to purchase all month will help you determine where you need to make sacrifices in your day to day life.
Once you’ve learned you can save $150 by cutting out Starbucks, you will get a good idea of how much money you can afford to pay to lower your debt. While sacrificing isn’t ever fun, creating and keeping a realistic monthly budget will benefit you in the long run and will allow you to be able to do those things again in the future without worry.
Step Two: Do Your Research
Now that you’ve created a budget you can stick to, it’s time to start shopping around for debt refinancing that works for you. There are many ways one can consolidate debt but not all of them are one size fits all. Here are few options to start looking into:
Debt Consolidation companies
There are many different companies that will consolidate your debt into a single payment for you each month. When investigating these types of companies it’s important to look for a few key things: transparency, how long a company has been around, it’s reputation, and the services they offer to you.
Knowing exactly what you’re getting involved with is extremely important. When looking for assistance with a debt consolidation company find out information like: how much it will cost AFTER the service is complete (this is important as you should never have to pay a fee before they will help you), how long it will take you to pay off the debt, what the eligibility requirements are, what the exact services offered are, and how well their customer service department treats customers. Knowing information like this can help save time, trouble, and money.
Balance transfers are a popular option for people who have financial debt under $15,000 because depending on your credit, you can be approved for a transfer with great introductory fees and low interest. When looking for a credit card company to help with your debt consolidation be sure to keep an eye out for a $0 annual fee and 0% interest.
This kind of debt refinancing can be tricky though because of expiring introductory rates. Typically the great deal you got in the beginning will vanish after 6 months, 12 months, or 16 months leaving you with full responsibility to pay the new interest rates and fees if you have not paid off your debt by the end of the introductory period.
If you want to apply for a personal loan, you can do so through your current bank or shop around to see what gives you the best deal. When looking for loans check with the issuing institution if an unsecured loan is available to you. Unsecured loans are based on your creditworthiness and do not use property as collateral. Like balance transfers, opt for a personal loan with a low interest rate.
Home Equity Loans
If you already own a home and have built equity from it, you may have the option to take out a home equity loan. A home equity loan is like a second mortgage, and only can be taken out if you have paid back some of your first mortgage. This kind of loan is good for someone who needs to borrow large amounts of money and has largely positive benefits for those who take them out, such as low interest rates, easier approval for those with bad credit, and tax deductible interest.
However, home equity loans can be dangerous if you cannot make the payments. A loan of this type is called a secured loan, which unlike unsecured loans, are not based on someone’s creditworthiness but are supported through using personal property as collateral. This means that if you miss payments on your home equity loans, the bank can repossess your house and sell it to make up for the money they lost.
Step 3: Don’t Stop After You Find a Way To Refinance
Just because you found the perfect method for getting yourself out a debt doesn’t mean all your money troubles will be solved. While you’re working down that debt look for additional ways to save more money. By shaving off extra, unnecessary costs you will help give yourself some wiggle room in that budget you made earlier. If you're looking to lower your bills, we can help you with that.