We all know that most debts accumulate interest. When you fail to pay your credit obligations each month, you can end up owing more than you should in the first place. This won’t only hurt your credit rating, but your financial health as well. This becomes an even bigger problem if you have several different debts – either by credit cards or loans. How can one pay all these debts at once?
Debt Consolidation makes it easier for you to pay debts with high interest into a single payment with a much lower interest rate. Through debt consolidation, you get to reduce the total amount of debt you owe and pay it faster. Are you wondering how you can consolidate debts? Here are a few options to consider.
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Debt Consolidation Loan
The first loan option that comes to mind is debt consolidation loans. Banks and non-profit debt consolidation companies offer such loans to combine all of your existing debts. Before applying for this type of loan, make sure to read all terms and conditions before signing. Failure to do so will have you end up having a loan cost that is higher than your existing debts due to the extra fees included.
Reverse Mortgage
A houston reverse mortgage is a loan option available to seniors who wish to use their home equity to consolidate debts. You can use this type of mortgage for any purpose – including consolidating debt. The best part about choosing a houston reverse mortgage when tackling debts is that this is tax-free. You get to choose between receiving a line of credit, lump sum, fixed monthly payment, or even a combination of these to pay for your debts.
Life Insurance Policy
That’s right – you can borrow your life insurance in consolidating debt. While this may not be the best loan option, but you can use this to borrow cash, and pay for all existing debts. The thing is, there is usually no need to repay your insurance company as long as the amount you are to borrow is less than the policy’s cash value. However, your survivors might not get anything if you choose not to repay the loan.
Good Read: How to Choose a Life Insurance Policy
Personal Loan
If you’d rather take a personal loan, then you can choose between banks, online lenders, and credit unions who will approve your loan. The thing about personal loans is that while it has lower interest rates and gives you several years to pay the loan, some lender requires you to pay an origination pay. You can get approved if your credit rating is poor
401k loan
This loan option meant borrowing funds against your retirement fund. When choosing a loan to consolidate them, let this be your last option. This requires you to pay the amount back within five years. If you fail to do this, they will treat it as an early withdrawal, subject you to income tax and even give you a penalty.
Using another loan may not be ideal to pay your existing debts. However, knowing what your options are if you in need of debt consolidation is always a good thing. Weigh in all options and understand the risks of each option before choosing one.