From time to time, most of us find ourselves in a less than perfect financial situation. Maybe the bills are piling up and you are struggling to pay back your credit cards even though you are already working two jobs. Or perhaps you just cannot keep track of who you owe money to and this has led you to miss multiple payments.
If your Debt has increased beyond what you can handle each month, it is time to consolidate your debt. Debt consolidation is a straightforward process that can restore your financial health and lead you back into the black over time. Fortunately, there are several different routes you can take to emerge from an unsustainable debt situation.
Let’s look at three options you have to help you consolidate your debt and manage your finances.
Use Your Home Equity
If you are fortunate enough to have some assets in the form of your real estate, then debt consolidation is a great option for getting free of your debt load. Using the equity you have on your home, you can secure a debt consolidation loan from many trusted providers. Home equity is essentially the amount you still owe on your mortgage subtracted from the amount that your home is worth on the market.
It is important to inform yourself of the rules involved in Australia for debt consolidation loans on home equity, but the process is relatively straightforward. By securing your loan with the collateral of your equity, you can be sure that the rates you will receive on your new loan will be much more favourable than otherwise.
Use Your Line Of Credit Or Overdraft
Depending on how much debt you currently owe, you may also be able to use your line of credit or bank account overdraft to pay back your creditors at once. If you have a reasonable credit score and a solid income, which can give you the confidence that you will be able to repay these amounts relatively quickly, then this is a reasonable option.
This assumes, however, that you have either an existing line of credit or you can acquire one easily. This may not be the case for everyone. Depending on your lender or bank, the interest rates on this type of credit might also be just as high as a credit card. Make sure to understand the rates of your lender before taking this step to consolidate your debt.
Consider Debt Settlement
Debt settlement is more of a last resort for consolidating your debt. With Debt Settlement, you reach an agreement with your creditors to repay only part of what you currently owe. The rest of your total amount will be written off.
The decision to use this tool should not be taken lightly. There are long-term effects on your credit score and you usually need to be able to pay back a lump-sum amount to your creditors quickly.
Additional caution should be used with predatory debt settlement companies who offer options that seem too good to be true. Many debt settlement plans, even in the best of circumstances, are not successful and there are many companies that are ready to take advantage of desperate individuals who come looking for a way back to financial health. Use your common sense and seek the help of a trusted financial advisor to steer you in the right direction.
There Is Hope
Even if it currently feels like there are no good options for escaping an endless cycle of debt, there are several ways to find financial freedom. Carefully consider the tools outlined here and decide that best suits your current situation. Before long, your finances will be back into the black.
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