Whether or not you should consolidate your debt is a relatively simple question: do you have multiple bills for which you are responsible every month? If so, then debt consolidation should be a consideration. The next order of business is assessing your current collective interest rate; if you can get a lower one through consolidation, then what’s stopping you – especially given the ease of now having to pay only a single bill each month. Once you understand the benefits of the decision, all that’s left is to figure out the terms.
Debt Consolidation Basics
There isn’t just a single way to consolidate your debt, in fact; the one that works better for you largely depends on your credit history. If you want to add another layer of risk to your debt consolidation actions, then you can look into taking out a home equity loan or retirement accounts 401(k) loan – but these aren’t necessary for the diarchy to follow:
1. Look to Secure a Debt Consolidation Loan from a Financial Lender.
The process is straightforward: get the best loan term you can base on your credit score, and then pay off your debt with the loan. This will consolidate all your monthly bills into one, and also usually lower the amount you pay. Of course, you’ll eventually pay more than the amount of your original debt due to the interest payments and administration fee. This option is good for credit scores in the fair-to-good range (FICO 689).
2. Debt Consolidation via Credit Card.
On the other hand, if you have a credit score that lands squarely in the good range (FICO 690 and above), then there’s little doubt that you can secure a high-limit, balance-transfer credit card with a 0% introductory rate. This time can last anywhere from one year to two years on average; during which you can plan to pay off all or most of your debt before the actual rate kicks in.
There are a few other things to consider, and the experts at Sierra Financial are well-positioned to help you navigate the world of debt consolidation. Contact us today.