The Options That Will Allow You to Consolidate Bills
At one point or another, many people find themselves in a situation in which their debt is becoming unmanageable. When this happens, you want options that will allow you to consolidate bills while lowering your overall monthly payments.
There are many advantages to using a home equity loan or line to consolidate all your bills. For one thing, it has tax advantages just like your first mortgage. Most people are able to deduct the interest that they pay on their taxes. This makes using a home equity product to consolidate bills a wise choice. The debts that you are looking to combine, such as car payments, credit cards, and personal loans, have no such benefits.
When looking to use a home equity product to consolidate bills, it is important to choose the one that fits you the best. As we said before, there are two types of home equity products that can help you consolidate bills, a home equity loan and a home equity line. Both have equal tax advantages and can be used to consolidate bills.
A home equity loan works much like traditional mortgage loan. You will usually have a fixed rate and payment. When you choose a home equity loan to consolidate bills, you will also have a set term in which the loan will be paid off. This is good because you know exactly how much time is involved and when the loan will be gone.
A home equity line of credit can also be a good choice to help you consolidate bills. These loans work much like a credit card with added tax benefits and lower rates. Your rate is usually variable, and your payment is based on a percentage of your outstanding balance. These are good if you want to have more money available to you after you consolidate bills, but don’t want the entire sum upfront. As you pay down the line, more money is available to you, similar to a credit card. You will have a draw period in which you can use the money as well as pay it back. Then you will have a repayment period in which you can only pay and not draw. These are a bit more complicated than a straight loan, so if you use this option to consolidate bills make sure you understand all the terms.
Using a home equity product to consolidate bills is a wise choice. Not only will this afford you a lower rate, it will also give you tax benefits. When you consolidate bills into one lower payment, consider using the equity in your home for a great deal.
How to Benefit From Consolidating Bills
There are many people who are dealing with financial problems because they have too many bills to pay each month. If you are over your head in debt, you may want to consider getting a personal loan so that you can consolidate your bills and get yourself back on track. There are many benefits that you can enjoy if you debt consolidation with a personal loan.
One benefit that you can enjoy if you consolidate bills by taking out a personal loan is improved credit. Your credit score is very important to your entire life and can effect other loan rates, and even your ability to get a loan in the future. If you can consolidate bills that you have, you can get them paid off, which will lead to a better credit score.
Lower Monthly Payments
Another benefit that will be very helpful when you consolidate bills is that your monthly payment will be lower. Instead of having numerous bills to pay each month you will only have one bill to pay and it probably will be a much lower payment than the combination of the bills that you have been paying. If you are barely making it by each month, having one lower payment can help you get out of your financial distress.
Lower Interest Rates
More than likely the bills that you are trying to pay have high interest rates, but you can get a personal loan for a fairly good interest rate and save some money. If you can consolidate bills that have high interest rates you will save a great deal of money over the years.
You can also benefit from consolidating bills because it will allow you to pay off your debts much faster. The reduced interest rate will have you paying more on principal than you are in interest, which will help you get rid of debt more quickly. Instead of dealing with your debt for years and never finding a way out, consolidating bills with a personal loan can help you get debt free in just a couple years.
If you are looking for a way to clean up your financial mess and get back on track towards a brighter future, you may want to consolidate bills with a personal loan. By consolidating bills, you can improve your credit, lower your monthly payment, get better interest rates, and pay off your debt much faster. Enjoy the benefits of being debt free in just a few years when you choose this way to consolidate bills.
Paying Back Debt Strategy
When paying back debt, a little strategy goes a long way. It can literally save you hundreds, even thousands of dollars in interest charges. And the best part is that the best, most effective strategy is so easy to follow.
List Your Debt Make a list of all your debt: The amount of each, the monthly payment and the interest rate. You may have trouble finding this information, but it’s worth bringing it all together into one place and documenting it in a format you can follow. You can’t manage your debt strategically if you don’t even know the full extent of it, now can you?
Remember to include your credit cards (be sure to include the different rates and balances for purchases and cash advances) other cards, loans, mortgages, and even money you’ve borrowed from friends or family. All debt counts when you’re trying to pay it off completely or to get it down to a manageable level.
Bad Debt and Good Debt Go through your debt and organize them into "good" and "bad" debt. This may sound a bit odd, but all debt is not created equal - certain types of debt are nowhere near as bad as other debt. A mortgage, for example, is an investment in a house, paid over a fixed term - there’s no real risk of paying a ridiculous amount of interest or never getting it paid off. On the other hand, the interest you’re paying on a credit card isn’t tax deductible and isn’t associated with an asset of value and so that debt is "bad" debt. Below are a few examples of both types of debt:
Good Debt - Mortgage, Student Loan, Car Loan
Bad Debt - Credit Cards, Store Cards
As a rule, good debt is for a fixed amount of time and allows you to buy something of value that without the debt, you couldn’t otherwise afford. On the flip side, bad debt is "revolving" and is used as a substitute for cash to purchase in many instances, non-essential products and services.
Prioritize For the time being, cross your good debt off the list. You shouldn’t consider paying your good debt off early until you’ve paid all your bad debts off.
First, arrange your debts by interest rate, with the highest interest rate at the top. Odds are that the debt at the top will be a store card or credit card, which could have a very high interest rate. Next, try to transfer as much money as you can from the high-interest cards down the list to the lower-interest ones.
Once you’ve done that, focus all your energy on repaying the debt with the highest interest rate. Pay the minimum on everything else and throw as much money as you can find at paying that debt off as quickly as possible.
A few ideas to come up with some additional monthly income are: Cancel any non-essential monthly commitments and put that money towards your payments. Until you pay off your bad debt - stop saving. Keep track of where your money goes, for a month or two. This will enable you to find areas where you’re spending money frivolously that you could be using to pay off your debt.
Do your best to give up any expensive habits you might have. You’ll be shocked at how fast your debts can go down if you put the money you normally spend on smoking, drinking or gambling towards them! I’m not trying to spoil your fun here. Simply make a few small sacrifices for a while, and your life will be so much better in the long run.
You have to be aggressive against your high interest carrying bad debt and focus on eliminating at all costs. This is a war, be the aggressor, win the monthly battles and before you know it you’ll win your war against debt.