Debt Consolidation Alternatives
May individuals are finding themselves in a position where it would make good economic sense to consolidate their debts. While many people are struggling to make their minimum monthly payments, others are on the verge of bankruptcy. Many of find that monthly payments are not a problem, but we realize that we may be spending far more than necessary. Debt consolidation allows an individual to place all or most of his debt into single loan. This offers several different benefits. The primary advantage is that it lowers the monthly payment to a level that fits within an individual's budget , thus allowing a person to meet all of his expenses and hopefully have enough left over to pay down the debt or apply some towards savings. Another advantage is that in most cases the interest rate is lower. This will save hundreds or in some cases thousands of dollars over the life of the loan.
Some additional alternatives include home equity loans. This is a great choice for many homeowners. This loan allows people to borrow up to 100% of the equity value in their home. In many cases it also offers some tax advantages. Life insurance policy. Some policies include a cash value. The policy owner is allowed to borrow from the accumulated value. The negative aspect of this option is that if you were to borrow money and then die before it was repaid then the outstanding balance (plus interest) would be deducted from the pay out. 401K. Most plans allow you to borrow a sizeable amount of money from your retirement fund. It is in your best interest to pay the money back as soon as possible. If you leave the company before the money is repaid then there is some stiff financial penalties. Lower rate credit cards. This may or may not be feasible depending on the size of your debt. However, if you can place all of your balances onto one low rate card then it may be a good option to consider.
The best defense to creating debt is to prevent yourself from accumulating too much in the first place. Beyond that, the next step would be to find a solution that offers you the best chance to regain financial stability and for many, a debt consolidation loan is the best alternative available.