It’s the first month of the year – you have built your personal budget in a spreadsheet and now see where you need to cut your expenses to get back on track. You already planned on making your own coffee at home and bringing lunch to the office, but the big one for you is trying to manage the huge credit card debt. A good way to manage your debt is by consolidating your loans and seeking assistance from a professional who will help you with your financial goals and set your finances straight.
Of course there are companies that specifically target debt consolidation loans as part of their business plan. However, many of these businesses are in it for the money – so seek out a credit counselor working for a non-profit agency. If not, make sure they have good reviews.
If you are a homeowner looking to secure a debt consolidation loan, you can tap into a home equity loan or get a HELOC (Home Equity Lines of Credit). The money you can take out is based on the amount of equity you have already built into your home. With that you can get a tax deduction on the loan up to about $100,000. This is considered a secured loan so if you default on your loan payment, you risk losing your house.
Another source option for debt consolidation is taking a loan against your 401K or retirement plan. Although you risk losing a chunk of your savings – the interest rates are moderate, because you’re basically borrowing your own money.
You can also choose to borrow against a life insurance policy, take a personal loan, or even borrow some money from friends and family. Regardless of the debt consolidation loan source you choose, make sure to weigh the pros and cons. Then plug the numbers into your spreadsheet and take it from there.