Having balances on several different credit cards may pose as a challenging process for many. In fact, it may even be difficult for some to pay off each debt when you have to split your payments among eight different creditors or accounts. Cases like these are not ideal if your goal is to improve your credit score as there is a bigger risk of late payment or worse non-payment of due bills.
Many experts believe that these situations are clearly unavoidable. What one may avoid, however, are the risks of late payment/non-payment which may lead to bad credit scoring. Debt consolidation is probably one of the most efficient ways for any individual having several accounts. It refers to the technique that rolls several debt accounts into a single payment. Consolidating your debts may be effective in preventing bankruptcy if your debts are not excessive and you have a good grasp of how you manage your accounts effectively and have a visible plan on how to keep these debts in check.
Read on as the experts from Fix Bad Credit share to you some of the effective ways on how you can consolidate debt on your own.
1. Borrow a Life Insurance Policy
Borrowing money from your life insurance policy may not be the most prudent way to consolidate debt, by far, but if you have no other option other than choosing between filing for bankruptcy or utilising a life insurance loan, then it is surely best to opt for the latter option. Your life insurance agency may have probably told you about this that you can actually borrow up to the cash value of your loan and utilise these proceeds to consolidate your debts.
Most, if not all, insurance institutions won’t ask you to make payments so long as the loan they’ll be extending to you is less than the cash value of the policy; of course, it is still ideal to make the payments anyway in order to get a good standing with your insurance company. Nevertheless, if worse comes to worst and you were unable to settle the loan, your death benefit will set off the proceeds you borrowed and your beneficiary may not get anything at all.
2. Credit Card Balance Transfers
Another do-it-yourself way to consolidate your debts is by transferring balances into a single credit card. This is viable if this single credit card allows you to spend large enough credit limit because a low credit limit will definitely not be able to cover your multiple balances from your other credit card accounts. If your credit card allows then you can transfer two to three of your credit card balances with the highest interest rate in order to unburden some of your debt pain. Before doing so, ensure that you will save money from the said move, if not then it’s not worth the effort and you may end up paying more than you’re aiming for.
3. Home Equity Loans and Lines of Credit
Just like in borrowing money from your life insurance policy, home equity loans and lines of credit are other ways to consolidate your debts. Borrowing money against your home equity is a closed-ended account that can be repaid over a period of time while a home equity line of credit is an open-ended account which is analogous to a credit card whereby you are allowed to borrow against and repay. Some of the advantages of home equity loans and credit lines include higher borrowing limits compared to other kinds of loans and it also often offers lower to zero interest rates.