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Consumer debt has risen significantly during a time where job security is not guaranteed by good performance. Many people are finding themselves making minimum credit card payments and seeing little change in their balances from month to month. If you are struggling to pay your bills, you have options. If you are still current on your payments and have a good credit score, there are steps you can take to determine the best choice to resolve your debt problem.
The first step to any debt repayment plan is to analyze your finances. Knowing how much money comes into your home every month and how much you spend on necessities such as your rent, mortgage and car payments can help you determine how much money you have left over to pay your other bills.
If, even after a careful analysis of your financial situation, you are still unable to pay your bills and live comfortably, debt consolidation may be worth considering. When you consolidate your debt, you get a new loan to pay off all of the other loans and credit cards that you owe. In many cases, especially for borrowers with good credit, a debt consolidation loan can result in a lower monthly payment.
When you consolidate your debt into a new loan, you pay off all of your debt with the loan proceeds, resulting in one payment each month as opposed to many separate payments to different creditors. These loans take the form of second mortgages, home equity loans and new credit cards with low introductory interest rates for transferred balances. It is important to understand the terms of your loan before you sign a promissory note.
Some consolidation loans, including second mortgages and home equity lines of credit, require borrowers to use their home as collateral. You should only consider this type of consolidation loan as a last resort because if you default on the loan, you can lose your primary residence. You will need to carefully weigh the costs of the new loan against your current debts. While your monthly payment will likely be lower because the term of the loan is longer, you may pay more over the life of the loan.
Banks also offer personal loans to their customers with good credit scores. While a personal loan is backed by your signature and credit standing, interest rates are higher than loans that are secured by collateral. A personal loan is a good choice for consolidating debt if you are concerned about your future ability to repay the loan and do not want to sacrifice your home if you become unable to make the payments.
While not as common as they once were, credit card companies still offer low introductory rates to new customers. Be sure to read the fine print before transferring any balances and don?t make any new purchases with the card until the old debt is paid off.
Consolidating debt can be an effective way to gain financial freedom. If you choose debt consolidation to pay off your bills, set up a household budget and don?t make any unnecessary purchases while you are making payments on the old debt.
These tips were written on behalf of Vertuity Mortgage, the leading debt consolidation firm in Winnipeg.? Visit us at http://www.vertuity.ca/ today
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