Is your wallet full of credit cards, and you can no longer keep track of your debts and payments? Are you struggling every month to make several payments on time?
Perhaps you should consider consolidating them all together in one debt, with only one monthly payment. This strategy will help you get a lower interest rate and a lower annual percentage rate.
The key is to be fully committed to paying off your debt entirely. What is the best way to repay your debt depends on how big the debt is, if you have a home equity, and on your credit score history.
We would now like to recommend five excellent ways of consolidating your debt, but remember – if you miss one payment, the deal can quickly turn against you.
#1 Credit Counseling
If you are not sure what to do, and you do not have a clue about financial terminology, perhaps it is better to let the experts do that instead of you.
Credit counseling agencies will analyze your situation and help you create a plan. But not only that, they will negotiate with your creditors on your behalf and make sure you get lower rates and one monthly payment.
However, their service can come with a small fee, and we strongly advise you to check at the consumer protection office to ensure they are safe to work with.
#2 Personal Loans
Personal loans are another option for consolidating your debts. The better the credit score you have, the lower the rate you can get.
But there are also debt consolidation loans with no credit check, in case your score is not the best possible.
What is great is that some lenders offer to transfer money directly to creditors, so you would not get tempted to spend it on other things.
#3 401k Loan
If you are a part of the 401k retirement plan, then you should know that there is an option to borrow your balance and use it to pay off your debts.
Keep in mind that the money you borrow from this fund has to be returned within five years. Otherwise, it would be considered an early withdrawal, and you will have to pay taxes and penalties for it.
Also, in case you leave your job during those five years, you will get a limited time to return the full amount. So even if you get an opportunity for a better-paid job, it can cost you so much more.
#4 Balance Transfer Credit Card
Although you already have too many credit cards, balance transfer credit card is the last one you need, we promise.
It will move and merge all your balances from other cards onto one new. However, remember that you probably would not be able to make a transfer if you have cards issued by the same lender.
#5 Ask Friends and Family
Think carefully before you ask a close person to help you with finances and do it only if you are more than 100% sure you will be able to give them that money back on time.
Although borrowing from someone you know seems like a safer and more easy-going solution, think twice before you ask someone, because this could jeopardize your relationship in case you are not able to repay as agreed.
The Bottom Line
Trying to solve your financial worries and debts is always tricky, but it is still better to have only one payment to think about, instead of multiple.
And not only in terms of money management and organization, but mentally too.
Regardless of the consolidation option you choose, you have to be prepared that if you are willing to do this right, you will have to sacrifice a lot of things and be extremely disciplined.