Being approved for a debt consolidation loan, with a fixed monthly payment schedule, is a debtor’s dream. This type of loan means you can actually see an end to those monthly payments.

But to be honest, debt consolidations is not always that easy. Sometimes it can be really difficult to find a consolidation loan that will actually work out cheaper. Sometimes you can even end up with more debt than what you had when you started, so you need to be careful.

Your goal should be to increase your cash flow, by lowering your overall costs. There are two things for you to keep in mind:

1. Plan to pay off your debt as soon as possible, preferably in 3 – 5 years.
2. Make sure you get the lower interest rate you possibly can.

Here are some of the ways you can consolidate:

Home Loans

If you can access equity in your property, this is one of the best ways to consolidate other debt. You can opt for a fixed or variable rate. You can also choose to have an access bond, where you will be able to obtain any additional amount that you might have paid in, over and above the required installment.

Your home loan can normally offer very favorable interest rates and low repayments.

Most of the time, there is no or low closing costs for this type of loan. But there is always a risk that you might lose your house if you can keep up the installments.

You can also consider rescheduling your home loan, if you have had it for a couple of years. Rescheduling your bond over a longer period would mean lower monthly installment. You can use the additional amount that has been made available to pay off other debt quicker.

Traditional Debt Consolidation Loans

Normally, a debt consolidation loan is an unsecured personal loan. Since there is no collateral, lenders view them as a higher risk loan. This will cause them to be a bit more expensive, and not always easy to get if you already have a lot of debt.

If the interest rate is too high or the term too long (ten or more years), you might want to think twice, and look for another method. But, if the rate and the term are right, this can help you save a lot of money in the end. When you calculate if it will be worth it or not, remember to calculate the cost of the loan from the start until it is paid off.

Debt Counseling

Even though debt counselors can help you get out of your debt, they don’t actually consolidate it for you.

They make use of payment plans, worked out according to your debts. You will pay your debt counselor with one monthly payment, and they will pay all your creditors.

If you stick to the payment plan the debt counselor works out for you, you can normally be out of debt in three to six years. However, you need to be a bit careful when you choose which counselor to use. If the don’t pay your bills, or pay them late, you will be held responsible to the lender, as the loans are still in your name.

Pension Funds

Depending on what type of fund you have, you might be able to borrow money from your pension fund. The key is that you are borrowing against your pension fund, and not withdrawing from it early.

This can however be quite risky. If you leave of lose your job you might have to pay back the full amount immediately, or you can be taxed and penalized for an early withdrawal.

Rapid Repayment

There is another, mathematical way to pay off your debt quicker. Draw up a budget to see how much you can afford to pay extra on your debt every month. Commit to using this amount for debt repayments only, it will benefit you in the long run. Pay as much as you can on your high interest debt first, while paying the minimum on the rest.

This is the least drastic way to reduce debt. Often people will find that they don’t have to apply for any other type of debt consolidation, but are able pay off their debt on their own. You just need a plan, and then stick to it.

Summary

The two biggest mistakes people make in connection with debt consolidation are:

1. Procrastinating. If you are waiting for the perfect moment, or the perfect solution you will only end up in more debt. Start today! There is no better time.

2. Not having a plan to pay off their debt after they have consolidated
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To apply for a debt consolidation loan you will have to fill out a short application form. You will then receive a FREE quote from well established, nationally recognized lenders. You do not need to decide now whether the debt consolidation loan is for you.

Just apply and compare the repayments to your current situation. There is no obligation on your part. If you decide that it is not for you, you simply do not have to accept the offer. You have nothing to lose and everything to gain.

20 Second Application

Now is the time to consolidate your debts if you're serious about paying down your debts and getting rid of high-interest payments. Consolidation helps you reduce the number of payments on debts and reduces or eliminates your debt amount.

There are different options to consolidate debts but you need to choose the right way out considering the type of debt you have, be it a personal loan, home loan, multiple credit cards or a combination.

Using a personal loan to consolidate credit cards, car loan, medical bills etc is one way of getting debt-free. But utilizing your home is at times even a better way to reduce your debt especially if it's a combination of secured and unsecured loans.

2 Ways to use your home and consolidate debts:

• Pull out extra cash by refinancing:
If there is already a mortgage on the home and enough equity too, you may go for debt consolidation refinance wherein you'll be able to pay off the existing loan and take out extra cash thereby borrowing more than the loan balance. But refinance for consolidation makes sense only if market rates are comparatively lower than what you are charged currently. This will help you save in interest payments, and consolidate debts with the extra cash and interest savings. But you need to be clear as to why you are refinancing and how it can help you.

• Watch out for second mortgages:
You can try out with second mortgages for debt consolidation if you have thousands to pay for credit card debts and medical bills etc. You can borrow at fixed rates as well as adjustable rates (home equity line of credit or Heloc).

Compared to credit card rates, second mortgages are available at reduced rates, often more than 10% lower than the former. So, you are likely to save in interest by going for home equity debt consolidation. However, you need to be aware that you don't run up the credit card balances right after consolidation or else you'll be in debt again!

Only consider home equity debt consolidation if you think you can afford payments on two mortgages.
 

To apply for a debt consolidation loan you will have to fill out a short application form. You will then receive a FREE quote from well established, nationally recognized lenders. You do not need to decide now whether the debt consolidation loan is for you.

Just apply and compare the repayments to your current situation. There is no obligation on your part. If you decide that it is not for you, you simply do not have to accept the offer. You have nothing to lose and everything to gain.

20 Second Application