Being in a debt is an overwhelming and daunting experience. It might even feel like the world is coming to an end. Despite that, we try to work against all the odds to settle the debt and move towards a more financially stable life. How can that be done? What you need to do is consolidate your debt. It might sound like an easy step that will take away all your debt problems. It is far more complicated than that. The experts at York Credit Services will educate you about the debt consolidation options available to you. You can reach out to them on their Facebook page: https://www.facebook.com/YorkCredit. In the meanwhile, we are here to tell you some of the options you could consider for debt consolidation.
Debt Consolidation Loan
One of the ways to consolidate the debt is by approaching a bank, credit union or finance company for a loan. When you opt for Debt Consolidation Loan, you can pay off all the debt by bringing it together into a single loan. As there is a single loan now, you only have to worry about that. This method of debt consolidation allows you to save money as the loan is offered at a lower rate. The fees charged are usually low, and can be paid off within a certain period which is usually between two to five years. To qualify for this loan, you need to have some security and a good credit rating. You can also get an unsecured loan of this type, but you will have to pay a higher interest rate.
Another method to consolidate the debt is by taking a second mortgage, refinancing your mortgage or using your home loan equity. The first mortgage is referred to the loan you took to buy the house. When you take a second mortgage, it is a loan based on the portion of the home you own. Using this option has various pros when using it for debt consolidation. There are lower interest rates and you are more likely to have a flexible payment arrangement. However, a second mortgage might not be a great option when you don’t have enough equity in your home. While taking out the second mortgage, you might also have to pay additional fees. Hence, processing this type of loan can be expensive. Credit counsellors at York Credit Services will educate you about it.
Line of credit or Overdrafts
The experts at York Credit Services will tell you about Line of credits or overdrafts. With this option, you are required to make minimum payments at the end of each month. This amount would go towards settling the debt. The interest rates are lower and monthly payment options tend to be flexible when you opt for lines of credit. You can choose to pay this line as fast or slow as you wish. They also have their own set of disadvantages. You have to ensure that you pay a certain amount every month otherwise you won’t ever get out of debt. You might have to higher minimum monthly payments in case the prime rates go up.