5 Easy DIY Ways to Consolidate Your Debt

Credit cards are a double-edged sword. On one hand, they can tide you over when you are temporarily short on funds. On the other, they can land you into trouble if you get into the habit of swiping mindlessly.

If you've racked up large balances on multiple cards, you could have a difficult time paying them off. In this case, you could opt for debt consolidation, a process that will enable you to roll several debts into a single one. The advantage of debt consolidation is that the new debt may offer a lower interest rate, or it could simply allow you to pay off the balance quickly by making the payments more manageable.

The process of debt consolidation is often carried out by a debt consolidation company. However, there are certain ways you can do this on your own. Here are five.

1. Credit Card Balance Transfer        

To attract new customers, many credit card companies offer credit cards with balance transfers that charge 0% APR for a promotional period of 12 to 18 months. For a small fee, consumers can transfer their balances from high-interest charging cards and then pay off the debt completely within the promotional period. The drawback of this method is that you may need a high credit score in order to qualify. Moreover, if you are unable to pay off the entire balance within the 0% interest period, you'll have to find another balance transfer card or pay higher rates on your balance.

2. Home Equity Line of Credit 

This allows you to take out a line of credit against the equity in your home and use the money to pay off your debt. Such loans usually have low-interest rates and higher borrowing limits compared to other kinds of loans. But if you become unable to keep up with the payments, you face the risk of foreclosure.

3. Debt Consolidation Loans 

These are available through local banks, credit unions, and even online lenders. Online lenders usually offer lower interest rates than a bank, and you can shop around for a loan without worrying that hard inquiries will ding your credit score. On the other hand, credit unions are a good choice for consumers with poor credit, as they work with borrowers to help them pay off their debt. Nevertheless, you must remember that a debt consolidation loan is still debt, and you must work hard and remain committed to your intention to pay it off.

4. 401(k) Loans 

Borrowing against your retirement fund can be one of the more disconcerting methods of debt consolidation. This is because if you can't pay off the loan within five years, it will be treated as an early withdrawal and you'll have to pay a penalty and income tax. Moreover, if you leave the job, you will have to repay the loan within 60 days or face early withdrawal penalties. On the other hand, the advantage of 401(k) loans is that you are borrowing from yourself, rather than someone else, and the debt is removed from your credit report as well.

5. Life Insurance Policy Loans 

This allows you to borrow up to the cash value of your policy, and you don’t have a deadline to pay back the loan. However, if you cannot repay the loan, the death benefit will be used to cover what you borrowed, and there may be nothing left for your heirs.

From the above-mentioned points, it can be seen that debt consolidation can help you get out of debt. Nevertheless, as with everything else, prevention is always better than cure.

One of the reasons consumers rack up large balances on credit cards is that they use them as a source of funds for their business. However, the exorbitant rates charged by card companies make it difficult for the borrowers to pay them down.

For such consumers, Fund&Grow has a great solution! We help clients with good credit obtain as much as $50,000 - $250,000 of unsecured credit at 0% interest for a period of 6, 12 or 18 months. If you’re interested in finding out more, call us at (800) 996-0270 and we'll help you out immediately!