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Debt Consolidation

Chances are, if you are reading this article, you have some serious debt accumulating. It's usually extremely daunting when the bills keep piling up, and you might not know where to turn to for help. Maybe you've heard a bit about debt consolidation but aren't too sure on how it will help you climb your way out of the hole you're in.


Read below to learn about different ways you can employ debt consolidation in Biddeford, ME.


Biddeford Debt Consolidation Loans


One of the more common types of debt consolidation is a consolidation loan, which enables you to merge all your debts under one single payment. There's a couple of different types of debt consolidation loans you can use.


Secured Debt Consolidation Loans in Biddeford, ME


Typically a secured debt consolidation loan will help you lump all of your debt payments under a single bill at a lower rate than the individual rates you've probably been getting. However, in order to secure a lower rate with a secured debt consolidation loan, you'll need some type of asset to use as collateral, such as your home. Additional specifics on that can be found below.


How much of a loan you can get depends on the type of collateral you're using and how much it's worth. These sorts of loans can also be repaid back over a long length of time, anywhere from 5 to 30 years, and they can often boost your credit rating if managed properly. If not, you risk defaulting on the loan and losing the asset used as collateral.


Unsecured Debt Consolidation Loans in Biddeford, ME


Much like a secured debt consolidation loan, an unsecured debt consolidation loan allows you to combine your debt payments under one lump sum with one interest rate. However, unlike a secured debt consolidation loan, you don't need an asset or collateral to receive such a loan.


Because you aren't offering up any collateral for such a loan, it's a much riskier loan for debt consolidators, and your rate of interest could be somewhat high. These loans are determined based on your credit history and score, and the upside to an unsecured debt consolidation loan is that you aren't in jeopardy of losing your asset should you default.


Using a Home Equity Loan as Debt Consolidation in Biddeford, ME


A home equity loan permits you to borrow money, using your home as collateral. This home equity loan is essentially a second mortgage that lets you turn the equity on your home (the money your property is worth minus the amount you owe on it) into cash to be used at your discretion, such as debt consolidation. These loans are set up to be repaid quicker than your mortgage in equal payments with a fixed rate of interest.


Home equity loans are secured loans that come with the same risks and rewards already mentioned.


Biddeford Credit Card Debt Consolidation Options


There are also programs that enable you to consolidate all of your credit card debt into one single payment (and interest rate). If you've got good credit, you could also be able to negotiate a lower interest rate on your credit cards, making it easier to pay off.


Another option is to get a new credit card at a low introductory interest rate (possibly as low as 0%) and transfer your credit card balance to your new card. While you're in your interest free rate, you should pay double payments so as to pay off your debt faster. But remember that the interest may very well be fairly high after the introductory period. You should consider this way of consolidating debt only if you know you can pay off the debt while the introductory rate is in effect.


Enrolling in a Debt Management Program in Biddeford


Another option when considering debt consolidation is to sign up for a debt management program. A credit counseling agency can help you set up a debt management plan to enable you to pay off your debt in a timely fashion. This agency will also usually negotiate with your debtors in order to reduce interest  rates and fees.


Once the repayments are negotiated you will usually create an account with the credit counseling agency and pay one lump sum a month into the account. The credit counseling agency will then disburse the repayments out to each creditor. This benefits you because you only have to make one payment, and additionally it gives creditors more assurance that your payments will be made on time every month.


Credit counseling agencies can also help you develop a budget that's simple for you to follow and help alleviate some of the stress your debt has been causing you. Providing you stick to the plan a debt management program will save you money, get rid of debt sooner and have a positive impact on your credit score.


 


Debt consolidation doesn't have to be scary, and there are many options in Biddeford that can help you get out of debt faster. Research all of your options and then choose the one that works best for you and your financial situation.

Benefits of Debt Consolidation