Let’s look at 11 tips for debt consolidation that will help you

Debt consolidation, many times, can be an excellent way to repay multiple outstanding debts with one repayment and even possibly save on the cost of those debts down the line. In fact, in America, it’s actually one of the most common causes of why people turn to personal loans, with home improvements being the actual #1 reason, based on a study done by Forbes advisor.

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Dan Morse, who works at Waterstone Mortgage in Arizona as an area manager, said that “Multiple channels of debt can cause anxiety, and it puts people in these situations where they need to consider which bills are top priority to pay over other bills, leading to a sour and negative mood.” 

“Getting the right type of terms for your personal loan can make a considerable difference when used to consolidate other debts,” Morse added. 

The 11 ways you were looking for when it comes to debt consolidation

There’s a bit of research and effort that goes into proper debt consolidation. You want to ensure that you’re employing the correct tools out there and working with experts, when necessary, who can help provide you with the right type of guidance. 

Using refinancing and cashing out. If you are a homeowner and are finding yourself with some unused equity, then a refinance loan for a cash-out could be just the product you need. 

Morse adds, “This type of loan allows for you to work with your existing mortgage and get cash at the same or similar rate as your current mortgage, which will be much lower than most types of personal loans. It will also be amortized over the extent of the mortgage, which usually is 30 years, leaving one payment to make per month.” 

HELOC – Commonly known as a home equity line that gives you a credit line based on your property again. 

Morse says, “You’ll get a lower rate due to using equity and not unsecured debt. It also allows you to repurpose the line of credit for future emergencies if they come up once it’s paid off.” 

Going the personal loan route. You can consider a personal loan for those without a home but still focused on debt consolidation. This is a great way of zeroing out those credit cards as well as boosting your credit score down the line. 

Julie Aragon, who founded Julie Aragon Lending Team and is based in Santa Monica, California, added to the above and said, “Debt consolidation with a personal loan will put you on the fast track for that next major loan, such as a car loan or mortgage.” 

See if you can borrow against your retirement. While it may stunt your retirement plans if not paid back quickly, borrowing against it means it’s a secured credit option, and that means a lower rate. 

Use a credit card with a promotion. Specifically a zero-interest balance transfer promotion. This will grant you the ability to pay off credit card debts without additional interest for the duration of the promo.

“Make sure to double-check the promotion and try your best to pay off the loan during the promotional period. These new credit cards may end up actually having a higher interest rate afterwards for whatever is left to pay. ” said Karen Condor, who is at Loans.org as a personal debt expert. 

Your life insurance can help. “Keep your liquidity strong by securely borrowing against your life insurance.” Says Aragon. It’s another strategy where the rates will be better due to the loan being secured. 

Organize your to-pay list. John T. McFIe, who works at Wealth Team LLC in Las Vegas, Nevada, as an investment advisor rep, states that all the debts should be recorded before the consolidation. 

Record key info such as the total amount owed, the rates, how long it will take to pay off, and what the minimum is per month.

Pick a focused approach. Known as the snowball strategy, always focus on one debt at a time. 

“Focus on those quick wins, such as the low balance debts. This helps to open up more cash flow for other debts you may have. You may look at the higher rates, which is known as the avalanche method, but then your cash flow is limited.” Says McFie. 

“When in doubt, a balanced approach between snowball and avalanche could also work.” Said McFie. 

Stop using high-debt cards. “Hide them, put them out of sight and out of mind, or whatever it takes for you not to use those cards.” Said Victor Vega, who works at a life insurance firm based out of New Jersey. “Even if they have a low or small balance, don’t use them until they are at zero balance, all of them.” 

Try to pay more than the minimum. Vega goes on to say that “when you’re doing debt consolidation, it’s all about getting those debts settled quicker. That means you can avoid any debt settlement issues later on.” 

Consider third-party help. There are some debt relief companies out there that will help you with debt consolidation, but always make sure you’re doing your due diligence and avoid getting into a worse situation. 

Lyle Solomon from Oak View Loan Group, an attorney, said, “Shop around where you can from a variety of financial institutions and lenders. Always compare the whole package before making your decision.”