If you’re like many people, you worry that your debt is so big you’ll never pay it off. Every month you pay what you can, but paying the minimums on multiple cards and loans doesn’t improve the situation. Consumer Debt Consolidation may be the solution you need to help you get out of debt and stay there.

1. Consumer Debt Consolidation: A Way Out of Debt
If you’re like many people, you worry that your debt is so big you’ll never pay it off. Every
month you pay what you can, but paying the minimums on multiple cards and loans doesn’t
improve the situation. Consumer debt consolidation may be the solution you need to help you get
out of debt and stay there.
Types of Consumer Debt Consolidation
Consumer debt consolidation comes in four primary forms:
* Personal unsecured debt consolidation loan
* Credit card debt consolidation
* Cash-out home refinance
* Home equity loan or line of credit
Each form has positives and negatives. You may find that one or two types would be more
appropriate for you. Your goal is to find the debt consolidation solution that is best suited to your
financial situation.
Personal Unsecured Debt Consolidation Loan
If you don’t own a home, you could apply for an unsecured debt consolidation loan. That means
that you don’t put up any collateral for the loan. You pay off all your debts with the consumer
debt consolidation loan, which leaves you with one monthly bill for the new total. You must
have excellent credit and a stable income to qualify. You might also discover that the interest
rate is the same as the current rate on your credit cards, which wouldn’t save you any money.
Credit Card Debt Consolidation
The average person receives one or two credit card offers every day. If you have high credit card
balances, you probably receive offers for low-rate balance transfers. If the credit line is large
enough, you could transfer all your debts to one card. Before you accept the loan, review the
initial rate, full rate, rate expiration, and transfer fees. If the rate is 7%, but only lasts six months
and has a 3% transfer fee, you won’t save much money. On the other hand, a rate of 0% for 15

2. months with a 3% transfer fee could be just what you need to get out of debt without adding new
interest charges. Both a personal loan and consumer credit debt consolidation can reduce your
credit score, but continuing to be plagued by debt will hurt you more in the long run.
Cash-Out Home Refinance
If you own your home and it’s now worth more than the mortgage balance, a cash-out home
refinance is a better option than either credit card debt consolidation or a personal unsecured
loan. By refinancing, you may be able to reduce the interest rate on your home, while also
pulling out enough cash to pay off your other debts. As with your original mortgage, the interest
on the refinanced mortgage is tax deductible, which would increase your savings. When
refinancing, beware of high refinancing fees. You should also avoid borrowing more than the
value of your home or borrowing so much that you can’t afford the mortgage payments. Both
could put you at risk of losing your home.
Home Equity Loan or Line of Credit
A home equity loan or line of credit also draws on the equity in your home. This is the best
option for people with a low, fixed mortgage interest rate. Like a first mortgage, the interest on a
second mortgage or home equity line of credit is tax deductible. A home equity loan allows you
to borrow a fixed amount of money without altering the first mortgage. You would simply have
two mortgage payments every month. A home equity line of credit (HELOC) gives you a credit
limit that you can borrow against within a certain time period, often ten years. You can borrow
as much or as little as you want, whenever you need, as long as you don’t exceed the credit limit.
Unfortunately, some people use HELOCs as personal credit cards, which puts their homes in
jeopardy. While using a HELOC to pay off other credit cards can save you money and help you
get out of debt, avoid drawing on the line of credit for luxury purchases and other non-
necessities.
Consumer debt consolidation can help you get out of debt more quickly than continuing to pay
the minimums on all your debts. If you’re serious about getting out of debt, you can find the right
solution to your debt problems. For more articles on Cons. Debt Consolidation, visit Bills.Com