The Best Debt Consolidation Moves That You Can Make

Posted on November 9, 2009. Filed under: debt consolidation | Tags: debt consolidation |

If you are a home owner having some equity in it, you have before you some of the best debt consolidation moves that are quite uncomplicated as well as inexpensive.

Consider the option of a home equity loan. A home equity loan has a couple of great advantages: first, it comes with a fairly reasonable interest rate and second, the interest you are required to pay is tax-deductible. Normally, a fixed-rate loan carries a 15-year term and the borrower has to pay an origination fee ranging from less than a hundred to several hundred dollars. The borrower is also required to pay the cost of an appraisal and title insurance.

“Cash-out” refinancing

Another nice option is “cash-out” refinancing in which a person having home equity can refinance his/her property for an amount exceeding that he/she owes and utilizes the additional cash to pay off his/her debt. Although the person gets very low interest rates this way, he/she can still stretch payments out over 15 or 30 years. If stretched over 30 years, the total interest cost can become quite large. It is, therefore, sensible to consider this as a one-time-only option.

Although not given due importance by many, refinancing one’s car is a secured loan against which a person can borrow money. However, one must keep it in mind that sometimes he/she may run out of car before running out of debt. It really becomes difficult to purchase a new car if one owes more than the car’s value.

You can also try for a personal loan. If you have a satisfactory credit history, you may be entitled to an unsecured loan. The interest rates may be to the tune of 10 percent, but that too is much less than the more than 20 percent you now have to cough up to your credit card company.

Ensure better terms

You must also try to ensure better terms for you through negotiation. This should not prove too difficult a job for you. Simply call your credit card company and ask them to reduce rates. Many credit card companies have authorized customer service people who are within their rights to instantly decide on your requests.

Apart from all these options mentioned above, you can also ask for assistance from an organization like National Foundation for Credit Counseling. This organization has branches spread all across the country. NFCC offers free debt management advice to anyone who wants it.