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Chances are, if you're reading this article, you've got 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. You may have heard a bit about debt consolidation but aren't too sure on how it may help you climb your way out of the hole you're in.
Read below to learn about different ways you can use debt consolidation in Mississippi.
One quite common types of debt consolidation is a consolidation loan, which allows you to merge all your debts under one single payment. There are a couple of various kinds of debt consolidation loans you can use.
Typically a secured debt consolidation loan allows you to lump most 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 period of time, anywhere from 5 to 30 years, and they can often boost your credit rating if managed properly. Otherwise, you risk defaulting on the loan and losing the asset used as collateral.
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're not required to have 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 according to 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.
A home equity loan lets you borrow money, using your home as collateral. This home equity loan is essentially a second mortgage that allows you to turn the equity on your home (the money your home is worth minus the amount you owe on it) into cash for you to use 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 stated earlier.
There are also programs that enable you to consolidate all your current credit card debt into one single payment (and interest rate). If you've got good credit, you might be able to negotiate a lower interest rate on your credit cards, making it easier to repay.
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 can make double payments in order to pay off your debt faster. But remember that the interest may very well be fairly high after the introductory period. Consider this way of consolidating debt only if you know you can pay off the debt while the introductory rate is in effect.
Another option when considering debt consolidation is to enroll in a debt management program. A credit counseling agency will help you set up a debt management plan to enable you to pay off your debt as quickly as possible. This agency will also usually negotiate with your debtors so that they can reduce interest rates and fees.
Once the repayments have been negotiated you will usually set up 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 payments out to each creditor. This benefits you because you only have to make one payment, but it also gives creditors more assurance that your payments will be made on time each 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. As long as you stick to the plan a debt management program will save you money, pay back debt sooner and have a positive effect on your credit score.
Debt consolidation needn't be scary, and there are many options which will help you get out of debt faster. Research all of your options and then select the one that works for you and your financial situation.