Debt Consolidation Loan

A debt consolidation loan is a viable alternative for consolidating numerous credit card payments into one monthly payment and thus freeing up more funds to maintain other obligations. There are several forms of loans for this and several companies that offer them. It is up to the consumer to find the right loan. The decision is largely based on the current condition of the borrower’s credit. If the score is high then finding a loan with a low interest and low fees attached is quite probable. If the borrowers credit score is low or non existent then finding a loan is more problematic, but it can be done. The borrower however, will more than likely have to deal with extremely high interest or a bad credit fee.

Loan sources: If the borrower is a home owner then an equity loan or line of credit might work. Credit cards are paid off in full and there is usually money left over. However, if the loan goes into default, the borrower runs the risk of losing the property. But, the good news here is the monthly payment is usually significantly lower than the individual credit payments were making this a very manageable situation. The best tip here is, once you pay off your credit cards, cut them up, no more. Instead take the opportunity to re-evaluate how money is spent in the household. Make a clear, common sense budget and stick to it. Adopt the rule of: If I want it and don’t have the money for it, then I don’t need it. In other words; it’s wanting what you have, not needing what you want.

Life insurance policies can also be tapped if they have a ACV (accumulated cash value). The danger here is what happens if it is borrowed against and the borrower dies? What are the implications? Serious consideration’s indeed. A good counsel with the insurance company is recommended. Most companies allow borrowing against a 401 K , check with the HR department for policies in this regard. Last and I do mean last; family or friends. Very tricky territory here, many relationships have been ruined or permanently altered. If this route is chosen then a contract is paramount and must be honored.

Bottom line: It only took a moment of bad decisions to get into debt. Plastic can be very alluring and cause serious damage. Be smart; realize that credit card companies are not free money machines with endless patience. Think about what you are buying before you swipe that card. Ask yourself these questions: Do I really need this? Can I pay it off at the end of the month? Am I just fooling myself here? You should not work for your money, your money should work for you.