Did you know that you can get a handle on your finances by combining your bills? If you feel trapped by the amount of debt you have and how much it costs to pay it back, debt consolidation could be your way out.
When we are drowning in debt, robbing Peter to pay Paul can become a way of life. However, simple steps like debt consolidation can stop the downward spiral and turn our lives around. When people consolidate their bills into loans with lower interest rates than what they are paying on their credit cards and other loans, they can usually lower their overall monthly payments and use more of their income to meet personal and family needs as well as pay down debt.
If you want to improve your finances by consolidating your bills, there are some important things you need to think about. First, when you combine bills, you should look for the lowest interest rate and fees you can find. After all, the whole point of debt consolidation is to help you move forward in life in a positive, proactive way by easing the financial pressure caused by multiple credit payments.
When you combine bills, the first step is to be very clear about what you want to do. Is your goal to free your cash flow from the grip of debt so you can improve your way of life? Or is it so that you can use the money you save each month to pay off your debts quickly? In either case, consolidating debt is likely to stop debt from getting worse. It's easy to use credit cards when we don't have enough money to pay our bills and buy the things we need, without even getting into the problem of spending money on things we don't need.
If you own your home and have enough equity to consolidate bills, home equity loans usually have the lowest interest rates. But if you know you'll have big expenses soon, like college tuition, you may be better off with a Home Equity Line of Credit. This will let you lower your monthly payments because the interest rate will be lower. It will also let you set up a line of credit that you can use when you need to. Discipline is needed to keep from getting too much debt again, but if you have the commitment and discipline to only use what you need, a home equity line of credit can be a flexible way to stop a trend of getting more debt and leave room for borrowing for important reasons in the future.
Home equity loans and lines of credit have lower interest rates than personal loans. But they are often the loans people choose when they want to combine bills. This is usually because most loans don't require collateral and are easy to get as long as you can pay them back and have a good credit history. Still, the interest rate on a loan will go up the more risk the lender thinks the borrower is. If you've had bad credit in the past, you might still be able to get a loan, but the interest rate will be higher.
Even though it's becoming more common to use a low-rate credit card to pay off multiple bills at once, you probably shouldn't do this if you want to get out of debt. A credit card can be flexible, and if you have to pay for more than one card, a low-rate card with reasonable annual fees will probably cost you a lot less than what you are paying now. But you know how those credit card companies are! Your limit will go up, and if you're like most people, you'll spend up to it. Would you like to take that chance?
These are just a few of the ways you can reorganise your finances by consolidating your bills. Even more are there. Take the time to learn about the products that are available, and before you decide to use a certain product to combine your bills, make sure you read the fine print.
Debt consolidation can change your financial life, but only if you combine your bills in a smart way. Before making a decision, it can save you years of pain to talk to a professional.
