Consolidating Debt

Somerset Mortgage Lenders and Gregg Marcus strive to keep the public educated with tips meant to make getting your loan as easy and painless as possible. To this end, they have put together this brief article on consolidating your debt.

Debt consolidation was designed to help individuals who are “drowning in debt” to regain control of their financial lives. Consolidating debt gives individuals the chance combine their various monthly payments into a single monthly payment that is usually lower than the sum of the individual monthly payments on the same debt. Payments on consolidated debt are also quite often at a lower interest rate than the rates offered by the individual lenders.

1 Warning Signs

If one or more of the following applies to you, debt consolidation may be in order

a You pay for normal living expenses with credit
b You transfer balances around from one credit card to another
c You can only afford the minimum monthly payments on your credit cards, and no more
d You have maxed out one or more credit cards
e You find yourself spending more than half your income to pay your monthly credit card payments
f You’re looking to open yet another line of credit in order to better manage your current debt, expenses, and lifestyle

The following is a breakdown of some of the best and most common ways to consolidate debt

2 Debt Consolidation Loans

The traditional way to consolidate debt is to take out a debt consolidation loan. This is a personal loan that is unsecured, and therefore considered riskier other types of loans. Lenders therefore will usually charge higher interest rates for these loans, the advantage to getting such a loan being the single (and hopefully smaller) monthly payment. People with lots of debt may find they have difficulty getting a lender to give them a debt consolidation loan, however, and may need to look further to find a viable debt consolidation solution.

3 Debt Settlement

Debt settlement agencies help you resolve debt by becoming the intermediary between you and your creditors, You stop paying your various creditors and instead make a single payment to the debt settlement agency.

In regards to consolidating debt, here are some of the basic options:

1) Unsecured debt consolidation loan.

2) Secured consolidation loan (home equity loan).

3) Credit counseling.

4) Debt settlement.

5) Chapter 13 bankruptcy (because of the repayment structure).

6) Transferring credit card balances with high interest rates on to a 0% interest credit card.

but won't getting a debt consolidation loan make my situation worse? i hve $65k in debt and i might fall further in debt if i'm not able to pay for it

Well, getting a debt consolidation loan has both its advantages and disadvantages. You'll have ease in making your payments since you'll just be making one payment with all your debts. However, the concept of paying debt with another debt defeats the purpose of debt relief in the first place. You'll just be adding insult to injury by having another bill to worry about.