Posted: 1 Apr '19

What is Your Plan to Pay Down Your Debt? How to Use a Debt Consolidation Loan

Debt Consolidation Loan

A debt consolidation loan is an incredibly useful tool for managing outstanding credit accounts and paying them off faster. Debt consolidation simplifies your finances by allowing you to combine all your monthly bills into a single payment. In many cases, a consolidation loan will also allow you to take advantage of a lower interest rate than you would be charged by paying your bills separately. Here are three ways to consolidate your debt.

Obtain a Loan from a Bank or Credit Union

The most common type of debt consolidation is a debt consolidation loan obtained through a bank, credit union, or other traditional financial institution. A debt consolidation loan is typically provided on an unsecured basis, so you'll still need to meet the lender's qualification criteria to obtain this type of financing. If you choose this method of debt consolidation, it's important to create a monthly spending plan to avoid continuing to rely on credit. In doing so, you avoid placing yourself back in the same position that got you into debt in the first place.

Add Your Debt to Your Mortgage

Another popular way to consolidate your debt is to add your debt to your mortgage. Most people find this form of debt consolidation loan to be the most convenient, as mortgage interest rates are typically lower than interest rates on unsecured loans. If you opt for this type of debt consolidation loan, you'll need to ensure that you are able to pay off your debt as quickly as possible. Otherwise, you risk lengthening your mortgage term and paying more interest over the long run.

Borrowing from Family or Friends

If you're unable to get approved for a debt consolidation loan, another option for combining your debt is to borrow money from a friend or relative. If you choose this method of debt consolidation, it's important to make your payments as agreed, otherwise you risk straining your relationship with your loved one.

The above are just a few of the ways you can consolidate your debts and get your finances back on track. Contact us today for more information about which type of debt consolidation loan is right for you.