Best Debt Consolidation Options to Pay off debt fast

Most people have a number of different types of debt, such as mortgage, outstanding credit-card balances and high interest loans. Unless you’re very fortunate, modern life makes it hard to avoid being in debt at some point in your life.

Types of Debt Consolidation:

Today with these debt consolidation options you can, though, reduce or eliminate the debt or lower your debt, pay less interest rates  in various ways.

  • Debt consolidation loan… read & apply below
  • Home equity loan or line of credit… read & apply below
  • Debt settlement… read & apply below
  • Credit counselling… read & apply below
  • Bankruptcy… read & apply below
  • Tax debt & student loan debt… read & apply below.
Credit Card Balance Transfer Option:

With credit cards, for example, you can transfer balances from a high interest card to a cheaper one. The kind of deals you can access will depend on your credit rating, but anyone with a good score should be able to take out a zero interest card. This means that you can move the balance from your current card (or cards) and pay a lot less each month.

There’s usually a one off charge for this (around 3%), but in the long run it’s a sensible move.

Basically, the balance transfer is a viable option for those who have an excellent credit score and have caught their issues with debt early on. The biggest issue with this is that you typically will face higher fees with transfers.

Of course, in the ideal circumstances, you will be able to qualify for a new card that will give you 0 percent APR on transfers for up to 2 years. This means that you have 24 whole monthly payments that you won’t have any interest added to them. Of course, sometimes, if you end up missing one, that negates the 0 percent interest agreement.

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Best Debt Consolidation Loan Options:

Another best option is applying for a consolidation loan. Even if you don’t have a perfect credit score, this can save you money and make life easier. The idea is that you take out a new loan and use it to pay off debt like credit cards, store cards and all other forms of debt.

There are two major advantages to consolidating your debts through a loan. The first is you can reduce the amount of interest you are paying. The other is you will have only one payment to make every month, reducing the chances of missed or late payments.

One of the main benefits of using a debt consolidation loan is that it can actually help improve your credit score.

Through proper debt management and budgeting with a debt consolidation loan, you can experience the amazing feeling of financial freedom.

Debt consolidation loan types:

There are two types of consolidation loan options available, one is secured loan in the form of home equity loan or line of credit and another is an unsecured debt consolidation loan (i.e a personal loan) based on your credit score, monthly income, and debt to income ratio.

Debt Consolidation Loans ~ Unsecured:

This is one of the best options for debt consolidation because you can use the funds to pay off nearly any debt you currently owe. Consumers typically use this for credit card debt, medical bills, personal loans, payday loans, and even furniture/electronic store accounts.

However, if any or all of the funds are sent to you instead of directly to your creditors, it can be used for anything at all, even to pay off your auto loan.

Lenders do place restrictions on approval for unsecured debt consolidation loans, there is no guarantee that you will be able to qualify to receive this type of loan. They often require borrowers to be able to provide proof of a stable source of income to insure that they will be able to repay the loan.

In addition, a number of other factors are taken into consideration when considering an individual for either a secured or unsecured debt consolidation loan.

Another option might be to consider asking a friend or family member to co-sign the loan for you.  This step should be taken into careful consideration before acting on it.

Remember that anyone who co-signs a loan for you will be taking full responsibility for the payments if you are unable to make them yourself.

Using a Co-signer to get a Lower interest Debt Consolidation Loan:

Having someone co-sign a loan for you is a serious step.  You should be absolutely certain that you will be able to make the payments before you ask anyone to co-sign for you.

If you are denied a debt consolidation loan, you should be aware of your other alternatives.  Don’t panic.  While debt consolidation is a great method to reduce your debts, it is not the only way.  You still have other options.

Debt Consolidation Loan that works Easily!
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Debt Consolidation loan Options using Home Equity Loan or Line of Credit (HELOC):

Looking for a way to pay off your debt, reorganize your finances, and increase your cash flow. Consider a home equity loan or line of credit.

For many homeowners, however, the most attractive and convenient option is to tap into the equity of their home.

A home equity loan or line of credit (HELOC) lets you directly access your home’s equity via a credit line from the lender that provides checks or a debit card. You can use the funds to consolidate debt, including credit card, car loans, student debt, and other high-interest loan.

Since the interest rate on your consolidation loan will be lower than the interest rate on the debts you currently owe, you’ll be able to pay off debts faster. You’ll also have just one monthly payment to keep track of.

Advantages of Using Home Equity to consolidate debt Options:

Because home equity loans and lines of credit are secured, they are usually easier to get approved for than other types of loans. If you itemize your taxes, the interest on a home equity loan or HELOC can be deducted in the same way as conventional mortgage interest.

If you have been turned down for a home equity loan, you should check with a mortgage broker.  Even if the bank or lender has turned you down, a mortgage broker may be able to assist you in reaching a solution.

Mortgage brokers have access to a variety of lenders and may be able to secure you a home equity loan even when your bank or lender has turned you down.

If you choose to use a loan for debt consolidation, the best option- if you are able to qualify for it- is the unsecured personal loan. If you’re not able to qualify for this option, it’s typically much easier to get a secured loan such as a home equity loan.

  • No cost and no obligation to check your eligibility
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However, this is a serious risk when it comes to eliminate credit card debt. This is the reason why most of the experts advise against this option for reducing debt. You could end up losing your house to foreclosure.

Understanding Debt Settlement (an approach to debt reduction)

Finding a creative solution for dealing with mounting debt can be difficult. Debt settlement has become an increasingly popular means for eliminating debt quickly.

Understanding debt settlement and the settlement process can make all the difference in finding the right solution for debt problems.

What is debt settlement?

Debt settlement is a process that allows debtors to repay their outstanding debts for less than the actual amount owed. The amount that debts can be settled for will vary and there are some creditors who may not consider a settlement at all.

Typically, though, many creditors will agree to a settlement for less money rather than face the prospect that the debtor may declare bankruptcy.

debt settlement

How does the settlement process work?

Debtors negotiate with creditors, either individually or through a third-party, until a repayment amount can be agreed upon.

A debt may be settled with the original creditor or through a collection agency, depending on the age of the debt.

In addition to reaching a settlement agreement regarding the actual amount that will be repaid, debtors can also negotiate how the account will be reported to the credit bureau, either as paid in full or settled in full.

Those seeking a settlement should expect to make an initial offer, as well as a counteroffer and all contact should be in writing.

How much can a debt be settled for?

The amount of a debt settlement will vary depending on the type of debt, how long the account has been delinquent, and who the creditor is.

Generally, the longer an account has been delinquent, the more agreeable a creditor is to a settlement and the percentage of what they are willing to settle for will be lower.

Typically, debt settlements may vary from 35 percent to 65 percent of the balance due, although again, each creditor is different.

What are the advantages of debt settlement?

Debt settlement allows consumers to repay their debts at a reduced price, either through a lump-sum payment or through a set number of monthly payments.

It allows individuals to get out of debt more quickly, usually in a matter of months rather than years, and it is not as a damaging to their credit as declaring bankruptcy.



What are the drawbacks of debt settlement?

The first disadvantage of debt settlement is that it creates a tax liability for debtors.  Any amount of forgiven debt over $599 will have to be claimed as income at tax time unless the individual can prove they were insolvent when the settlement took place.

Secondly, there is the damage that is done to the consumer’s credit report. Any negative account information such as late or missed payments, delinquencies, and charge-offs can remain on the individual’s credit report for up to seven years.

Is it better to use a debt settlement company or negotiate a debt on one’s own?

While there are companies that offer debt settlement services, they are not necessary for the negotiation process.

It’s possible for debtors to negotiate a deal on their own without having to pay the heavy fees that are usually associated with a debt settlement company

When is debt settlement the best option?

While debt settlement will not apply to every situation, it generally fits best for those who have available cash to settle debts, don’t qualify for bankruptcy, or just want to get rid of their debt problem once and for all.

Before choosing any option, it’s always best to speak to a credit counselor and determine which solution is right for the individual situation.

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Debt Management Program

This type of debt consolidation program is typically done through a credit counseling program and applies to any sort of revolving debt. This includes store accounts, payday loans, personal debt sent to collections, credit cards, and even medical debt.

What is Debt Management and Credit Counseling

If you have followed all of the above steps and you are still unsuccessful in qualifying for a debt consolidation loan, you will need to consider credit counseling.  A credit counseling agency will supply you with budgeting and financial advice about your specific situation.

Since each debt case is different, a credit counselor will look at the particular circumstances of your individual case and try to work with you to find a solution to your debt problems.

A debt management plan may be able to be established in which the credit counselor arranges an agreement with your various creditors.

If a debt management plan can be established, you will make a single payment to the credit counseling agency and they will make the individual payments to your various creditors.

Your current creditors may be willing to accept a lesser amount than what is actually owed in exchange for certainty of payment.  In most cases, your debts will all be paid off in at least 5 years.

Bankruptcy

Your last option is, of course, to file bankruptcy.  Bankruptcy is generally the last alternative for individuals or businesses that have accumulated more debt than they are capable of paying off in a reasonable amount of time.  There are two types of bankruptcy, chapter 7 and chapter 13.

*Chapter 13

With Chapter 13 bankruptcy, a plan is reached where you will pay off your debts over time.  While it is hard to establish credit after filing Chapter 13, it is even more difficult to do so after filing Chapter 7.  For this reason, Chapter 13 should always be your first consideration.

*Chapter 7

Chapter 7 bankruptcy requires a liquidation of assets.  After this liquidation, your creditors are paid off and your debts are discharged.

If you reach the point where you must file bankruptcy to resolve your debts and pay off your creditors, you should not view it as a catastrophe.  Some might even claim that it is a new beginning and a chance to start over free from debt.

The key is to create a budgeting strategy that will keep you from falling back into debt.

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Student Debt Consolidation Options:

Type of debt consolidation is used only for Federal Student Loan debt. The term “direct” refers to the William D. Ford Direct Loan program, which provides the federal student loans. This consolidation loan can be sued for federal student debt, as long as one of your loans is FFEL or Direct student loans.

Private Student Consolidation Loan

This type of debt consolidation loan is used for consolidation of both private and federal student loan debts. However, it’s not a good idea to convert your federal loans to private debts.

After all, if you do this and you end up getting in trouble, you will not be able to use federal repayment programs and you won’t qualify for any of the student loan forgiveness programs.

Federal Tax Debt Installment Agreement

When look at your debts and have several years of tax debt still owed to the IRS. You might try to roll them into one payment plan. This will allow you to pay off your back taxes in manageable monthly installments instead of several different payments.



Is Debt Consolidation Right for You?

If you are struggling with debt, the best solution for you will help you to rein in those monthly payments and keep your credit from being damaged by bankruptcy. Of course, as with anything else, there are also some disadvantages to debt consolidation.

Therefore, it’s a good idea to take the time to weigh the pros and cons before you sign up for anything to give you some debt relief.

Pros of Debt Consolidation

When it comes to debt consolidation loans, you should take some time to understand the financial benefits.

All of your payments are rolled into one single payment. This means that debt is easier to manage in your budget. Because you only have to be worried about one bill instead of several.

The interest rate on the debt is much lower with a debt consolidation loan. After all, most of the high-interest credit cards have rates of 20 percent and higher. The right consolidation loan will usually reduce that interest rate to approximately 10 percent or less.

You will be able to pay your debt off much quicker. After all, the interest rate is lower, which means that when you make a payment, more of it is going to the principle instead of just chipping away at the interest charges. This means that you will end up paying off your debt in a few years instead of decades.

You can avoid damage to your credit. When you consolidate debt, you are able to stay on top of it. This means you can avoid damaging your credit score by having missed or late credit card payments and defaulted accounts.

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