In today’s world, being debt free is almost impossible to achieve. Imagine being faced with emergency expenses such as hospitalization and tuition fee payments. Tapping into your savings account is not a good idea if you don’t want your reserves depleted faster than you can say “gone!”
The strategy of debt consolidation is suggested for people who own multiple credit cards and are actually knee-deep in credit card bills. Consider these figures:
Credit card 1: $15,000 at 14% interest
Credit card 2: $ 9,000 at 12% interest
Credit card 3: $ 3,000 at 17% interest
With these above given figures, your total debt is $27, 000 at various interest rates.
With bill consolidation, you can take out a loan amounting to $27,000 or higher so you can pay off all these loans so you will only pay one interest rate. This way, you get only one bill in a month and you can also shop for consolidation loans at lower interest rates.
Most credit counselors suggest home equity if you are in the verge of bankruptcy since most lenders are willing to give higher loan amounts at lower interest rates. If you opt for this strategy, however, you need to remember that your property is at risk and you need to make your monthly payments so that it will not be foreclosed.
The key to reducing the interest rates you have to pay is to allot every spare dollar for the repayment of the loan. This way, you can reclaim you property at the soonest possible time and you get to restore your financial well being and credit health too! And when all is said and done, remember that debts are not bad, you just need to make sure that you are loaning for the right purpose. Also, never borrow more than you can afford.
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