Paying off debt pending on several different credit cards may pose as a challenging process for many debtors. In fact, it may even be hard for many to satisfy all debts when you have to split your available payments among nine different accounts or creditors. This situation is not ideal if you want to improve your credit score because there is a higher chance of late payment or even worse unable to settle all accounts.
Many experts think that these are clearly unavoidable; but all agreed to the fact that the risks of late payment/non-payment which may lead to bad credit, however, is. One of the best solutions they’ve come up with is debt consolidation. Indeed, debt consolidation is already an old technique but still finds its effective application in the current times. The strategy pertains to the technique whereby it rolls several debt accounts into a single payment. Consolidation is a great way to avoid filing for bankruptcy especially if your debts are not excessive, and if you know how to manage your accounts effectively and have visible plans on how to keep these debts in check.
If you want to know more how you can properly consolidate your debts, read on as the financial experts from Fix Bad Credit cover some of the effective ways on how you can do it, too!
1. Credit Card Balance Transfers
Transferring balances into a single credit card is a viable option in consolidating your debts. The option is effective if a single credit card allows you to spend large amounts that can cover all your other multiple balances from your other credit card accounts. Indeed, the logic is simple as a low limit credit card account won’t be sufficient to cover larger dues.
Hence, if your credit card allows you to cover your multiple balances from your other credit card accounts, then you should maximize its potentials by transferring three to four of your credit card balances with the highest interest rate so you can unburden some of your debt pain. Ensure also that you will save money from doing such transfer. Otherwise, it’s not worth it and you may end up paying more than you're wishing for.
2. Borrow a Life Insurance Policy
Getting money from your life insurance policy may not be the most sensible way to consolidate debt to date; but if you have to choose between filing for bankruptcy or utilising a life insurance loan, then it is highly advisable to choose the latter option. Your insurance company may have already explained this to you the moment you signed your insurance policy agreement. Borrowing money up to the cash value of your loan and utilising these proceeds to consolidate your debts is allowed, although it is not highly encouraged as they are supposed to be utilised during your retirement period.
Most, if not all, insurance companies will not demand you to make payments for as long as the loan they will be giving to you is not more than the cash value of the policy; indeed, it is still advisable to make the payment so you can get a good standing with your insurance institution. Nonetheless, if you are really in the middle of a bad financial situation and you won’t be able to settle your loan, then your death benefit will have to cover the proceeds you have to pay back to the insurance company and in effect, your beneficiary or you won’t get anything at all.
3. Home Equity Loans and Lines of Credit
Borrowing money from your home equity is the same as borrowing money from your life insurance policy. The only difference between borrowing money against your home equity is that it is a close-ended account that can be settled over a certain period of time while a home equity line of credit is an open-ended account which is somewhat similar to a credit card, allowing you to borrow against and repay.
Some of the benefits of home equity loans and credit lines include higher credit limits compared to different types of loans and it also often offers lower to no interest rates.