Debt consolidation - Options for Reducing Your Debt
Studies show that Americans are now saving less than ever
before. Along with that, Americans are carrying a heavier debt
load than ever. It's easy for a home loan, a car loan and a few
credit card bills to get out of hand, and many people are
struggling with more debt than they can easily pay. To make
matters worse, new bankruptcy legislation will make it harder
than ever to file bankruptcy for those who simply cannot pay
their bills.
There are a number of solutions available
that allow most people to reduce their interest rate on their
debt, reduce their total monthly payment, or both:
Ask for a lower rate on your credit card. If you
have been making payments regularly, and you haven't had a
history of late payment, you may be able to lower your interest
rate on your credit cards simply by calling your credit card
company and asking them! It doesn't always work, but the market
for credit cards is pretty competitive these days, and many
lenders would rather lower your interest rate than lose you as a
customer. It's worth asking.
Get a new credit
card. If your lender isn't willing to lower your rate, shop
around for a credit card with a better interest rate. There is
no reason to be paying 20% or more in credit card interest if
you don't have to. The interest on credit cards is not tax
deductible, but if you can get a credit card with a lower
interest rate and you move balances from other cards to that
one, you can save quite a bit.
Take out a
traditional bank loan with collateral. You can probably obtain a
simple installment loan from your bank by putting up cash or
investments as collateral for the loan. Like credit cards, the
interest isn't tax deductible, but the interest rate may be
better than credit cards, and if you consolidate several
payments into one with a bank loan, you will lower your monthly
payment.
Take out a home equity loan or
home equity line of credit. If you have equity in your home, you
can borrow up to 80% of your equity in either a lump sum or a
revolving line of credit. Interest rates are still quite low on
home loans, so this one could be a good way to consolidate your
debt. As a bonus, the interest is tax deductible. A minor
downside is the fact that these loans usually have application
fees and/or closing costs.
Most people can utilize
one of the ideas above to help them reduce their debt. If none
of these options work for you, you should consider speaking to a
credit counselor, who can outline other options that may work
for you. Many credit-counseling agencies are non-profit, so it
may be worth your while to talk to a credit counselor if nothing
else will work.
About the author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the
owner of Retro Marketing, a firm devoted to informational
Websites, including End-Your-Debt.com, a site devoted to debt consolidation and
credit counseling, and HomeEquityHelp.net, a site devoted to
information regarding home equity loans.
Author: Charles Essmeier
