After paying multiple bills in a single month, you may have the idea of consolidating your accounts into a single package, so that your life can be simplified. While debt consolidation is a common process, you need to keep a few tips in mind so that you consolidate in the correct manner.
Consider Home Equity
When you want to consolidate your bills, your home's equity can be a very valuable tool to use. You could take out a home-equity loan or a home equity line of credit to gain access to money that you can use to pay off your debts. By doing this, you can get a low interest rate and a tax deduction at the end of the year. The amount of interest that you pay on these loans is tax deductible, which can lower your taxes.
Look at Interest Rates
One of your primary concerns during the consolidation process should be the interest rates involved with each account. When you consolidate your debt into a single account, you should try to find a source of funds that has a lower interest rate than what you are already paying. If you pay off the debt with money that you borrowed at a higher interest rate, you may simplify your life with a single payment, but you actually may end up spending more money in the long run.
Balance Transfers
Many people who have problems with multiple debt accounts consider using credit card balance transfers as a way to consolidate their debt. With a credit card balance transfer, you move the amount that you owe one credit card company over to another card. You can take advantage of zero percent introductory rates with many credit cards. If you pursue this option, you have to always make your payment before the due date or the credit card company can raise the interest rate on your card.
Professional Help
When you want to consolidate your bills, a number of companies may be willing to help you with this process. If you want to work with a company that offers this service, make sure that you deal with a legitimate provider. Some companies charge predatory lending fees for this type of service and do not provide much more than what you could get without them. Check reviews to see what previous customers thought of a company before signing on with them.
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