I have been associated with Gerri Detweiller
for a few years now and have always trusted any information
offered. I also find the material always right in tune with
the information at this site. Gerri has a new website called
DebtConsolidationRX and has offered the following debt consolidation
article for our use.
The name and the subject is, The Best Ways
to Consolidate Debt.
I should also point out that Gerri is the author of a new book
called The Ultimate Credit Handbook which I will soon be reviewing
and offering this site my bird' eye view of the contents. But
I know in advance it is top notch as is all Gerri's material
including the following... Thanks Gerri from all of us.
The Best Ways to Consolidate Debt
Next to winning the lottery, a debt consolidation loan is a
debtor's dream. You'll have one monthly payment - and hopefully
be able to finally pay off those debts.
In reality, consolidating bills isn't always easy. If you have
a lot of debt, it can be hard to find a consolidation loan at
a lower interest rate. And if you're not careful, you can end
up deeper in debt than when you started.
Your goal in consolidating your debt should
be to lower your overall costs. To accomplish this there are
two things to keep in mind:
- Get the lowest interest rate possible
- Have a plan to pay off your debts in 3
- 5 years.
Here are some of the best ways to consolidate:
Using Credit Cards - The good news
about this method is that with a good credit rating, you may
get a much lower rate than other forms of consolidation loans.
And since credit card issuers don't require collateral, you
aren't "risking the farm." Call your current issuer
to ask what interest rates they will offer you if you transfer
balances from other cards over to theirs. Go for a fixed rate
if you can get it, and ask them to waive any transfer fees.
If you can't negotiate a low rate with your current issuer,
try shopping for a new card. But be careful! Too many applications
for credit in a short period of time can hurt your credit rating.
Once you do consolidate this way, be sure
to set up an optimal payment plan so you can be debt-free in
3 - 5 years.
Betting the Farm - With a home equity
loan, you borrow against the value of you home, minus any other
mortgages. The two major kinds are: 1. A Home Equity Loan -
a fixed amount of money for a fixed period of time (sometimes
at a fixed rate) and 2. A "Home Equity Line of Credit"
where you borrow up to a pre-approved credit limit (interest
rates usually variable) and can borrow again if you still have
These loans can offer attractive rates, and the interest is
usually tax-deductible if you itemize. Many issuers offer no
or low closing costs for these loans. Interest rates are often
variable, however, and there's always the risk that you can
lose your home if you can't pay. Refinancing your home and taking
out money to pay off bills (called "cash-out refinance")
is yet another way to tap the equity in your home. If you can
refinance at a substantially lower interest rate, you'll eliminate
the high interest costs of the debts you pay off, and you could
even come out with a lower payment than you have right now since
rates are so low. Make sure you understand the total cost of
refinancing. Take any money you've freed up by paying off other
bills and use that to create an emergency savings fund.