Debt Consolidation – Options For Reducing Your Debt

Studies show that Americans are now saving less than ever before. Along with that, Americans are carrying a heavier debt load than ever. It’s easy for a home loan, a car loan and a few credit card bills to get out of hand, and many people are struggling with more debt than they can easily pay. To make matters worse, new bankruptcy legislation will make it harder than ever to file bankruptcy for those who simply cannot pay their bills.

There are a number of solutions available that allow most people to reduce their interest rate on their debt, reduce their total monthly payment, or both:

- Ask for a lower rate on your credit card. If you have been making payments regularly, and you haven’t had a history of late payment, you may be able to lower your interest rate on your credit cards simply by calling your credit card company and asking them! It doesn’t always work, but the market for credit cards is pretty competitive these days, and many lenders would rather lower your interest rate than lose you as a customer. It’s worth asking.


- Get a new credit card. If your lender isn’t willing to lower your rate, shop around for a credit card with a better interest rate. There is no reason to be paying 20% or more in credit card interest if you don’t have to. The interest on credit cards is not tax deductible, but if you can get a credit card with a lower interest rate and you move balances from other cards to that one, you can save quite a bit.


- Take out a traditional bank loan with collateral. You can probably obtain a simple installment loan from your bank by putting up cash or investments as collateral for the loan. Like credit cards, the interest isn’t tax deductible, but the interest rate may be better than credit cards, and if you consolidate several payments into one with a bank loan, you will lower your monthly payment.


- Take out a home equity loan or home equity line of credit. If you have equity in your home, you can borrow up to 80% of your equity in either a lump sum or a revolving line of credit. Interest rates are still quite low on home loans, so this one could be a good way to consolidate your debt. As a bonus, the interest is tax deductible. A minor downside is the fact that these loans usually have application fees and/or closing costs.


Most people can utilize one of the ideas above to help them reduce their debt. If none of these options work for you, you should consider speaking to a credit counselor, who can outline other options that may work for you. Many credit-counseling agencies are non-profit, so it may be worth your while to talk to a credit counselor if nothing else will work.


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Why Choose A Debt Consolidation Loan?

Are you wondering why choose a debt consolidation loan? If you are one of the many people who continually struggle to cope with an ever increasing amount of debt the solution could well be within your reach.

Are you feeling overburdened with debt? Are you paying out too much every month for your credit cards, store cards and loans? Then why not replace them all with one, lower, convenient repayment through a consolidation loan?

If your are looking to:

reduce interest rates

lower your monthly payments

avoid bankruptcy

consolidate your bills

have one monthly payment

or simply get out of debt the fastest way possible

then a debt consolidation loan could provide the answer.

How can a debt consolidation loan help with debts?

Consolidation loans can give you a fresh start, allowing you to consolidate all of your loans into one - giving you one easy to manage payment, and in most cases, at a lower rate of interest. A carefully-managed debt consolidation loan can help in the following ways:

Cut your monthly payments.

You may be able to find a debt consolidation loan that works out cheaper than the combined interest of your current credit cards, overdrafts, store cards etc. Any method of borrowing that will charge less interest can cut your debt considerably.

Make your payments easier.
If you're in trouble because you forget to pay your bills, opting for a debt consolidation loan will mean just one monthly payment. Many lenders will allow you to pay by Direct Debit, so you won't even have to send a cheque.

Improve your credit rating.
If you're finding it hard to get credit, a debt consolidation loan can help to slowly rebuild your credit rating. Pay your bills in full and on time, and your credit history record will soon show an improvement. After a certain period, the arrears on your credit record should disappear and you will be able to apply for a cheaper loan

How do I find the best debt consolidation loan?

The best debt consolidation loan varies from person to person, as the loan you're offered will depend on your financial circumstances.

Secured on your UK home, low cost, low rate, cheap, low interest debt consolidation loans can sweep away the pile of repayments to your credit and store cards, HP, loans and replace them with one, low cost, monthly payment – one calculated to be well within your means.

With a Debt Consolidation Loan you can borrow from £5,000 to £75,000 and up to 125% of your property value in some cases.

A Debt Consolidation Loan is a low cost loan secured on your UK home. It frees up the spare capital (or equity) in your home to repay your store card and other debts.

It can reduce BOTH your interest costs AND your monthly repayments, putting you back in control of your life.

Are debt consolidation loans expensive?

On the whole they are more expensive than other loans in terms of APR. This is because your credit rating will show the bank that they are taking a risk in lending to you, and they have to cover themselves in case you don't keep up your monthly repayments.

Debt Consolidation Loan rates are variable, depending on status. Your monthly repayments will depend on the amount borrowed and term.

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What Is A Debt Consolidation Loan?

A Debt consolidation loan could be the solution if your objective is to reduce interest rates and lower your monthly payments, avoid bankruptcy, consolidate your bills and have one monthly payment, or simply get out of debt the fastest way possible.

Are you feeling overburdened with debt? Are you paying out too much every month for your credit cards, store cards and loans? Then why not replace them all with one, lower, convenient repayment through a consolidation loan?

Consolidation loans can give you a fresh start, allowing you to consolidate all of your loans into one - giving you one easy to manage payment, and in most cases, at a lower rate of interest.

Secured on your UK home, low cost, low rate, cheap, low interest debt consolidation loans can sweep away the pile of repayments to your credit and store cards, HP, loans and replace them with one, low cost, monthly payment – one calculated to be well within your means.

With a Debt Consolidation Loan you can borrow from £5,000 to £75,000 and up to 125% of your property value in some cases.

A UK Debt Consolidation Loan is a low cost loan secured on your UK home. It frees up the spare capital (or equity) in your home to repay your store card and other debts.

It can reduce BOTH your interest costs AND your monthly repayments, putting you back in control of your life.

Debt Consolidation Loan rates are variable, depending on status. Your monthly repayments will depend on the amount borrowed and term.

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Erase Debt Problems While You Still Can

With the economy slowing, now is the time to lower excessive household debt. Families currently in decent financial shape may find themselves in a serious state in the event that jobs disappear or other hardships occur. Some economists have said this high personal debt could be the economy's "Achilles' heel" as it softens. Although most debt problems are occurring among households with incomes below $50,000, according to the Federal Reserve, higher-income ones aren't immune.

Reducing debt isn't fun, nor is it always easy. Nevertheless, it is better to cut it now before a soft economy possibly reduces your income with which to pay the debt. The first step is to review your finances to see if you are vulnerable to debt problems. Most certified financial planners recommend that no more than 10-15% of take-home pay go to nonmortgage debt. That is debt paid to student, car, and/or personal loans, credit cards, etc. As a rough rule of thumb, many planners recommend that people aggressively target any debt whose interest rate runs 10% or more.

A note of caution here. Many people have refinanced their home mortgage or have taken out second mortgages, and more families may refinance as interest rates drop. The potential danger with this is that they often roll piled-up credit card debts, car payments, or other nonmortgage purchases into the refinancing--in short, they "mask" their nonmortgage debts inside their mortgage.

Assuming you have excessive debt you would like to reduce, what should you do? Here are several ideas from the Financial Planning Association, Denver, Colo.:

* Make a spending plan to document your income and expenses more precisely. Identify those monthly expenses you can eliminate or reduce in order to minimize the accumulation of additional debt and to free up funds to pay down existing debt. Delay buying a new car or new clothes, for example, or brown-bag lunch instead of eating out. Imagine yourself on an emergency budget should you lose your job or suffer a decline in income from such things as fewer overtime hours. What are the bare-minimum expenses you would have to meet and what could you do without?

* Get under control the things that are causing you to go into debt in the first place. Are credit cards the problem? Limit their use or quit utilizing them entirely. Start paying off new charges every month so you don't pile up the principal on which you are paying interest charges. Pay more than the minimum payment.

* Put tax refund, year-end bonuses, or any other extra monthly cash toward your debts. If you do have a tax refund, consider adjusting your withholding in order to free up income sooner. When paying off debts, start with the highest-interest debt first, or the one with the lowest balance so you can feel good about paying off a debt quickly. When it has been accomplished, put the payments you were making on that debt toward the next debt, and so on.

* Consider debt consolidation, but be very cautious. It may make sense to consolidate several high-interest credit cards onto a single lower-rate one, but just be sure you cancel the old cards so you don't rack up new debts on them. A home equity loan can work, too, but remember that you are putting your home at risk if you can't pay off the loan. Moreover, be sure that the total payments under a consolidation loan are smaller than the total payments of the individual ones over the same loan period. Don't consolidate debt you typically aren't paying interest charges on, such as doctors' or lawyers' fees.

* For more serious debt problems, consider working with a nonprofit credit counseling service or support groups such as Debtors Anonymous.

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Should you consider debt consolidation? These services can put the financially overburdened on the track to debt freedom

Q I'm having trouble paying my bills on time. Can a debt-consolidation agency help me?

A Your ability to get back on track and consistently pay your bills by their due date is critical to recovering your credit standing. Here's how to tell if debt consolidation is something you need to consider.

Evaluate your position: Run the numbers for a clear snapshot of where your money is going. Write down the exact details of your income and expenses for two months. Now add up all your debts and total the minimum payments due on each.

Financial planners say if you can afford to pay double the amount of all your minimum payments each month and still put away at least 10 percent of your income in a savings fund for emergencies, you just need a disciplined spending plan so you can accelerate paying off debts. Can you get a cheaper cellphone plan or make do with basic cable? You'd also be surprised at how much you can trim from your monthly out-of-pocket expenses by making a weekly shopping list for groceries and personal-care items and sticking to it. Avoid using credit cards and refrain from unscheduled trips to the ATM. Call each creditor with whom you've been delinquent and ask to work out a payment plan, and again, stick to the plan.

Know when you're in over your head: Several of the following factors combined can signify that you need professional help. * Your voice mail is filled with messages from debt-collection agencies. * If you buy items on credit you should buy with cash (groceries, personal-care items). * If you regularly skip some bills to pay others or take credit-card cash advances or borrow money to make ends meet until payday.

If these situations are familiar, you're not alone. Nine million consumers sought credit counseling last year. Your level of debt, your level of discipline and your prospects for increased income are key indicators of the kind of help that's right for you. In addition to simple budgeting and credit counseling--but before bankruptcy--there's debt consolidation. But only about 33 percent of those who seek debt consolidation qualify for this service.

How it works: Members of the trade group National Foundation for Credit Counseling ([800] 388-2227 or nfcc.org) can be a source of low-cost credit-counseling services--$50 maximum to set up your account and no more than $20 a month in administrative fees. (If charges are higher, find another agency. And check the agency's reputation with the Better Business Bureau.)

Based on your income and debt, certified credit counselors will contact and negotiate with all your creditors to agree on a consolidated monthly payment amount. Every month you send the agency a single payment that is portioned out to each of your creditors until your debts are paid off. Most accredited debt consolidators can arrange with your creditors to reduce or waive interest and late fees. It's important that the debt-consolidation program have an educational component to teach you the money-management skills that will keep you dedicated to managing your future debt appropriately.

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