Financial Consolidation Methods

If your monthly budget is being pushed to the limit due to high-interest credit card accounts, then you will want to consider consolidating that debt and paying it off. There are several financial consolidation methods that consumers can use themselves. The advantages to consolidating your own debt is that you save money on the service charges paid to debt consolidation firms, and you gain firsthand experience in managing your money.

Borrow From Loved Ones

According to online financial resource Bankrate.com, one option to consolidating your debt is to borrow funds from a friend or family member that has the resources, and then work out a payment schedule. Draft an agreement on paper that will bind you to payment terms as an incentive to pay back the money. You can also offer to enter a credit counseling program that will help teach you how to use your credit wisely and stay out of future credit problems.

Home Equity Line of Credit

According to the online credit resource Lower My Bills, a home equity line of credit can be an excellent financial consolidation method because of the potential for a low interest rate. It is important to remember that a home equity line of credit uses your home as collateral, so if you default on the payments you may be putting your home in jeopardy.

Refinancing Your Home

Refinancing your home is a way to consolidate your bills, and potentially lower your interest payments on your mortgage as well. If you have been paying on your home for 10 years or more, there is a gap between the value of your home and the amount left on your mortgage that may be substantial enough to pay off your debt. If you get a lower interest rate than your original mortgage, then you monthly mortgage payments would drop as well.

Balance Transfer

You might receive an offer to transfer your credit balances to a new credit account as a way of consolidating your credit. Before you get involved in a program like this, be sure to read all of the terms and conditions. There may be a very low introductory interest rate on transferred balances, but that rate may go up after the introductory period is over. If the interest rate being offered after the introductory period is agreeable to you, then consider using a balance transfer account to consolidate your debt.