What You Should Know About Debt Consolidation

Using one credit card or loan to pay off multiple credit cards or loans to simplify debt repayment is known as debt consolidation. In some cases, you may even be able to secure a lower interest rate from your lender. 

Types of Debt Consolidation

These are some different methods that can be used to consolidate your debt. However, your options may be limited depending on your credit standing, any real estate assets you have, and the type of debt. 

Credit Card Balance Transfer

A credit card with a promotional interest rate on balance transfers and a high credit limit is a good option for consolidating other high-interest rate credit card balances onto one credit card. 

By combining your balances under an interest rate that is lower than the rate of your existing balances, you can save money on interest and only pay towards one credit card instead of different cards. 

Debt Consolidation Loan

Often, lenders offer unsecured personal loans in the form of debt consolidation loans, which have been designed specifically to pay off debts. These loans have a fixed repayment period and interest rate to ensure more stable repayment terms. 

Student Loan Consolidation

This type of loan is for consolidating different student loan balances into one loan with one monthly payment. If you have different student loans with multiple servicers, this loan can be beneficial to you. Student loan consolidation is available for federal and private loans. 

Home Equity Loans and Lines of Credit

Typically, this loan option gives you the option of borrowing about 80-85% of the equity of your home. Home equity loans and lines of credit allow you to take out some money that you repay using fixed repayments over a fixed term. 

A home equity line of credit (HELOC) is like a credit card, where you only pay interest on the money you spend and have access to the money whenever needed.