Advice Consolidation Debt_1, Heed It Or It May Cost You More

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Advice consolidation debt_1 is essential when checking out some available options. If you have finally decided to take control of your obligations, it would be wise to look at some of the various options that are offered. But wait a minute, just looking at them will not solve the problem. So what does one have to do?

To choose the offer that best fits your needs, it is good to compare them. It is wise therefore to study the pros and cons of each one. Only after studying all these offers and comparing them will you experience some success if you follow the advice consolidation debt_1 so your money will not go into a debt trap. Let us consider them one at a time, shall we?

Balance Transfers

Credit card providers are aggressive at offering balance transfers from your cards to theirs of course. They are everywhere; there are credit cards agents in malls telling people that they can provide you with the best possible and lowest rates if you will use their credit cards to transfer your balance.

Here are the advantages of balance transfers:

• Lessen the interest rates you’re paying with all your credit cards by transferring your loans into one card.
• Some credit cards allow you to have the lowest rates possible such as 1.9 percent if you transfer your loan within a given time like 60 days and up, after opening the account.

Disadvantages:

• The transfer will cost you as there will be fees in the process.
• There are requirements that you have to meet if you want to avail of their lowest rates.
• You will have to pay a higher interest rate if you fail to pay on time.
• Using balance transfer too often may result in a poor credit score. When this happens and your card with the low interest expires, you could end up with a card that incurs a double digit interest.

Cash-out Refinancing

Another advice consolidation debt_1 is to refinance your current mortgage into a lower fixed interest rate and make use of some cash out of your home equity. Cash-out refinancing lets you have a higher principal and in effect will give you the extra cash needed for your other loans.

Advantages:

• Your payments for the interest rates are usually tax deductible.
• Compared to your credit card’s interest rate, your loan which is you mortgage has either a lower fixed rate or much lower rate.
• When your obligations are consolidated this way, you have a better chance at having extra cash because the monthly payment is lower.
• The extra cash from the lower monthly payment can be used to start building an emergency fund.

Disadvantages:

• You have to keep in mind that you have to make sure that you don’t move out of your home while your home equity is consolidated with your other obligations.
• It’s probable that if you fail to pay your loan which is your mortgage, you could lose your home.
• There will be a lot of fees that you have to pay including appraisal fees and closing costs so shop around for the best deal.

Home Equity Loans

This is otherwise known as home equity line of credit which is also using your home as the collateral. The advice consolidation debt_1 here is that you have to be absolutely sure you can follow the repayment schedule to the letter or run the risk of losing your home. Make sure you understand why you got in debt and work on untangling these issues. This is not a good solution in crisis as payment could be in jeopardy if there is a job loss.

Advantages:

• The interest to this type of loan is usually tax deductible.
• Compared to credit cards, home equity loan has a much lower interest rate. And because you have a much lower interest rate, the monthly payment is lower as well.
• You will save money from the monthly payment that you can use to start building an emergency fund.

Disadvantages:

• You cannot sell the house until the loan is paid off in full because the home equity that you consolidate with your credit card loan will not be available for you.
• You need to finish paying your home equity loan before you can have the chance to sell the house.
• The second mortgage will have a much higher interest rate than your first mortgage.

Personal Loans

One advice consolidation debt_1 is to get a personal loan. This is applicable if either you don’t have a house or you don’t want to use your home equity for debt consolidation. The trouble with this is that it is not easy to get an unsecured loan at a low rate that you can live with.

Advantages:

• A personal loan is usually easy to obtain although the interest rate will depend on your credit score.
• It has a lower interest rate compared to your credit cards.
• You don't have to lose your home if you default.

Disadvantages:

• Personal loans have a much higher interest rate than that of home equity. Thus, you will have higher monthly debt payments. It is considered to be an unsecured loan that is why it has a higher interest rate compared with cash-out financing and home equity.
• Your credit rating may go down due to account closure and inquiry and obtaining a new account.

You can choose among the given options for consolidation debt. One advice consolidation debt_1 that you must remember is to prevent spending more than what you have at the moment. You may need to stop using your old credit cards to lessen the temptation of charging purchases, making you more prone to more debts in the future.

If you go into the same cycle, there will be more trouble ahead especially you may not have the same option as the first time you went through this route. So address the issues that got you in debt in the first place and make a commitment to follow to the letter the advice consolidation debt_1. 

Advice Consolidated Debt_1, Avoid the Debt Trap
All that borrowing and not paying on time and in full on credit cards is not the way to live. Just consider this: If you charge $5,000 a year on credit cards and just make minimum payment for 30 years, do you know that you would have given away almost a million dollars in interest? And to add insult to injury, you would still owe $74,000? It is not too late to turn this around and avoid that debt trap.  

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