Debt Consolidation

You are dreaming of starting a home-based business, buying a department, buying a new car... but you don’t know how to implement this dream because you don’t have the required capital? As a “standard” American citizen, your household has a debt of about $14,500. And there seems no end in sight. In fact, some 40 percent of American families admit they annually spend more than they earn. The situation in other developed countries is not much more different.

With statistics like those, it's no wonder many of us feel we're in too deep. But digging out requires that we first recognize that a problem exists and reflect on how we got so heavily in debt.

What to do – where to start?

Where can you start to change your situation and to get the capital you need to realize your dreams (or at least a part of them)?

Standing in front of this mountain is seems difficult to find a solution and to overcome this problem but you should start right now in consolidating your debts as with time it becomes even more difficult. The first step: 

Stop spending - Stick to your Budget and start with your Debt Consolidation!

What can I do next?

There is no simple, single scenario that will work for everyone as each case is different. Debt Consolidation basically means that you are looking for a cheaper credit rate in order to reduce your monthly pay off load and to reduce significantly the payback time.  How to start with the Debt Consolidation?

Debt Consolidation can be achieved with a series of actions, for instance:

1.      Family and Friend Loans

The advantage of these loans is that you usually don’t need to pay interest and you can use the money to pay off debt with high interest rates. The disadvantage is that you run risk to destroy the relationship if you don’t pay them back. As an advise, just get it all in writing and define your monthly pay off rates. Borrowing money at zero interest is by far the easiest way for Debt Consolidation.

2.      Renegotiate the payment terms with your primary lender

An effective way to reduce your debt pressure is to renegotiate the payment terms with your primary lender. For a mortgage lender it is better to renegotiate than repossess your home. If you explain your economic problems there is a big chance that they accept a stretch out of the payments.

3.      Credit card transfers

A few years ago a new “hobby” was born: “rate surfing”. Many banks offered credit cards with cero or a very low introductory rate and people used this to surf from one credit card to an other in order to avoid the payment of interest. However, the number of credit cards with a fee free 0% interest balance transfer offer attached has fallen dramatically and credit institutes are charging now fees for balance transfers in their droves to recoup some of the revenue they lost from offering the 0% deals.

4.      Life Insurance

It is possible to borrow money against the value of a whole life insurance. The advantage is that if you are not able to pay it back, the amount of the loan is deducted from the benefits paid to your beneficiaries.

5.      Home equity Loans

A home equity loan or line of credit allows you to borrow money, using your home's equity as collateral. What is collateral? It is property that you pledge as a guarantee that you will repay a debt. If you don't repay the debt, the lender can take your collateral and sell it to get its money back. With a home equity loan or line of credit you can lose the home and be forced to move out if you don't repay the debt. Equity is the difference between how much the home is worth and how much you owe on the mortgage. The advantage of Home Equity Loans is that they are inexpensive, relatively easy to obtain and that they may offer a tax deduction for the interest portion of the loan.

6.      Join a Credit Union

Try to join a Credit Union as these generally offer lower interest rates and fees on loans compared to other credit institutes. A frequently used approach for Debt Consolidation.

7.      Borrow from Retirement Fund

Before you decide to take a loan from your retirement account, you should consult with a financial planner, who will help you decide if this is the best option or if you would be better off obtaining a loan from a financial institution or other sources. Some plans will require you to suspend 401(k) elective-deferral contributions for a certain period after you receive a loan from the plan. If this is the case with your 401(k) plan, you should consider the consequence of this suspended opportunity to fund your retirement account. Only use this option if you have no other choice. If you can't pay the loan back within five years, the IRS will assess taxes and penalties. Also, if you quit your job, your employer will call the loan in full when you leave.

8.      Increase your Income

Sometimes the fastest solution for Debt Consolidation is to increase your income utilizing skills and knowledge of yourself, your partner or family members. It is incredible what you can do these times in your spare time, in particular if you have a computer at home with internet connection. Have a look at home-business opportunities or Internet Business Opportunities to get some ideas what you could do in order to improve your financial situation.

9.      Recommended Resources offering Credit Repair Programs and Debt Consolidation Services

Please feel free to check out our recommended Service Provider for Debt Consolidation and Credit Repair. As a general recommendation, you never should rely on only one credit or debt consolidation provider but check at least three offers and choose the best one. As a best start, we recommend the following services: