Debt consolidation usually occurs with the help of a third-party credit counseling service. However, you can consolidate your debt all by yourself. Knowing your options can make consolidation of your debt easier than ever. Your credit score will suffer less damage when you decide to take matters into your own hands. How can you consolidate your debt by yourself?
Use A Different Credit Card
Paying a high interest rate on your credit card is going to keep you in debt longer than necessary. Transferring your outstanding balances to a new credit card can shave the amount you pay in interest each month. How does it work?
Say you have three credit cards that each carry a significant balance. Credit card one carries a balance of $10,000 with an interest rate of 25 percent. Credit card two carries a balance of $12,000 with an interest rate of 29 percent. Credit card three carries a balance of $8,000 with an interest rate of 21 percent.
The payment for credit card 1 is going to be $708 a month. Credit card 2 will carry a payment of $890 a month. Credit card three carries a payment of $540 a month. Your total monthly minimum payment is $2,138 a month.
Transferring your payments to one card with an interest rate of 9 percent will reduce your payment significantly. Your total monthly payment on a $30,000 balance carrying 9 percent interest would be $1,775 a month. You will save over $4,500 a year.
Get An Equity Loan
Using a home equity loan can be a good way to consolidate your debt each month while saving money. Let’s use the same scenario in which a borrower owes $2,138 in minimum monthly payments. How much will you save with a home equity loan?
Home equity loans tend to be good options because interest rates are very low on any type of home loan. This is because you are securing the loan with an asset. The asset in this case is your home. Expect to pay an interest rate of around 4 percent if you have good credit – 720 FICO score and above. Those with lower credit scores (680 to 700) can expect to pay between 5-6 percent or higher.
Your monthly payment on a $30,000 home equity loan with a 5 percent interest rate comes to $1,625 a month. You save over $6,000 a year compared to your old minimum payment.
Settle Your Debt By Yourself
Creditors will listen to customers who are having a hard time paying their bills. You must take the first step by asking for help. A debt settlement plan can save you up to 50 percent of your balance as well as lowering your interest rate.
A borrower who owes $30,000 in credit card debt would see that number shrink to $15,000 in as little as 2 years.
This is a savings of over $15,000 versus your original payment or using loan consolidation. All you have to do is establish your inability to pay. This can be proven by mentioning a hardship such as a job loss. Late payments are also evidence that you cannot pay the balance in full.
Keep Your Credit Intact
Balance transfers and equity lines of credit will not hurt your credit score. Debt settlements only hurt your score until the the balance is paid off. However, settling your debt puts you in a better position to strengthen your credit score in the future. Unlike bankruptcy which can harm your credit for up to 10 years. Settlement will give you a much better debt to income ratio that lenders like to see.
Don’t worry if you don’t have perfect credit at the moment. There are credit card and equity loans out there for any credit score. Be prepared to pay a little more in interest compared to borrowers with good credit. Any of these options will save you money compared to what you are currently spending each month on the minimum payments that don’t get you anywhere.
Do it yourself loan consolidation can be done on your own terms. There are plenty of lenders who are willing to help you consolidate your debt – if you have good enough credit scores. Take advantage of your chance to pay less each month. Stop watching your monthly interest payments go down the drain and into the credit card company’s profits. You may even be able to lower your balance depending on the course of action you take.
Call today to speak with a representative about how debt consolidation can help you. Fill out the form right now to get more information about your debt relief options.