Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.
Listed here are some debt-consolidation best practices.
If you own a home and has some equity in it, take out a home equity loan. A home equity loan has a fairly low interest rate as compared to most. Another advantage is whatever you do pay is tax-deductible.
Do a cash out refinancing. Another option for those with home equity is refinancing your property for greater than the amount you owe and using the extra cash to pay off debt. The downside of this is that the total interest cost over three decades can be pretty huge.
Get a personal loan. If you have reasonably undamaged credit, you may qualify for an unsecured loan. This option may be a long shot for some but if you do get it you might be rewarded with a fairly reasonable loan evaluation.
Refinance your car. You might not think about this option but it is a secured loan and you can borrow against it. The downside of this is that the car may be so devalued long before you are out of debt. It’s tough to buy a new car when you owe more than it’s worth.