Best Debt Consolidation Options

If you are planning to take the road to debt consolidation, then you have probably realized that not all debt consolidation options are the same. Ranging from consumer credit counseling to home equity loans, the different debt consolidation options vary greatly depending on where you live and the type of financial situation you are currently in.

Below are some of the most popular and most effective debt consolidation choices that you can do in order to survive your current financial crisis, and have the opportunity to build a stronger financial future for yourself.

This is the most common debt consolidation route that most people take. Not only can home equity loans help you manage your debts, these loans can also help you do it at a very decent and modest interest rate. However, the only problem with using the equity in your home for debt consolidation is that you are putting a lien against your house. That means that if for some unfortunate reason you were not able to make the payment for your debt consolidation, then your house could be foreclosed. Additionally, unless your house continues to appreciate above and beyond that which you have already borrowed against the house, this is a one time option.

Usually, a lot of people will manage their debts by transferring the different credit card balances that they have into one low-interest credit card. This is perhaps one of the most commonly implemented debt consolidation options today. Many who are struggling with debt use this option because there are credit cards that offer a special introductory interest rate for a limited period of time (12-24 months) offering rates as low as 0 percent. This can be a suitable short term fix until you have your finances sorted to the point where you can start making regular payments to reduce your debt.

Although this debt consolidation option can be most convenient, there is a catch. You should be able to pay off the debt that you have on the card before the introductory interest period is over. Should you be unable to pay your previous balance, you will end up paying more in the long run than you would have originally.

There are several credit counseling services that also provide a number of debt consolidation options. These credit counselors negotiate directly with your credit card companies in order to get you a lower interest rate so that you can pay as much of your outstanding debt as possible. For this service you will typically pay the credit counseling service on a monthly basis and then the credit counseling service in turn pays your credit cards.

While this type of credit consolidation is another useful alternative, you can get the same results without the help of these credit counselors by taking advantage of the balance transfers that some credit cards offer, allowing you to consolidate all your credit card debts into one low interest credit card.

It is very important that you carefully decide which debt consolidation option is right for you. Consider your available assets and future plans, consult with professionals, and then choose the right debt consolidation option that best meets your needs.

Resorting to bankruptcy should be a last resort option. Selecting this type of debt consolidation will affect your credit score in a very negative way, which is why it is very important that you first consider the other available options before taking this one. Working with a debt management consultant or debt consolidation service will help you get a better understanding of whether this approach is the best for you given your financial situation. If after review with a professional, filing for bankruptcy appears to be the best solution, it is one way to consolidate your debts.

The video below discusses some of the different debt consolidation options and which might be right for you given your unique financial situation.