Reduce debt with a carefully prepared debt consolidation loan

To simplify your debt, debt consolidation loans work. But when it comes to debt relief, it is only the first step. It doesn't make any sense to get a consolidation loan without changing your spending habits, because otherwise you're simply trying to borrow your way out of debt. Debt consolidation makes sense if, by grouping all individual forms of debt into one place, the rate of interest is lower. But you could end up paying a lot more in the long run if the rate of interest is only lower because the term is longer.

{|Source for this article: For real debt reduction, plan your debt consolidation carefully by Personal Money Store

Plan ahead for worthwhile debt consolidation

Debt consolidation takes careful preparing to conserve on interest and get out of debt faster. Numerous free debt consolidation calculators are accessible online. You are able to figure out all the factors that will determine if debt consolidation will work using these tools. Make a plan of action by experimenting with a variety of interest, payment and term combinations.

Top opportunities for debt consolidation

A variety of debt consolidation options can work for you. Some of the best debt consolidation options are listed by M.P. Dunleavy at MSN MoneyCentral. When you have equity as part of your home, explore a home equity loan. Home equity loan interest rates are low (high single digits) and the money you pay in interest is tax deductible. A secured loan you probably don't think about is your car, which you are able to refinance for cash to pay down debt. A personal cash loan can be a good option because the rate of interest can be a lot less that what you’re paying to the credit card company.

Debt relief can grow like a rolling snowball

When it comes to debt consolidation, many financial advisers believe that for real debt reduction, you have to formulate a plan to settle each debt separately. Financial adviser Dave Ramsey likes what he calls the “snowball approach. The snowball approach pays off debts one by one, from small to large. List your debts in order from small to large. Start with the smallest debt as the first priority. The snowball approach motivates you with success by paying down the simplest debts first. The debt snowball works for dealing with debt, but it takes many financial discipline, budgeting and saving money.

Citations

moneycentral.msn.com

daveramsey.com