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Debt Consolidation – Options For Reducing Your Debt
By: Charles Essmeier
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. |
