Perhaps you have considered a debt consolidation loan. Debt consolidation involves taking out one loan to pay off one or more other loans. Very often debtors will use the money from the consolidation loan to pay off several other high-interest debts, such as credit cards, car loans or other higher-interest loans.The way it works is you borrow a sum of money from a financial institution (a bank or credit union), and use the money from the loan to pay off your other obligations. You can start just by calling the bank where you normally do business. Ask them for recommendations.
Never pay a fee to a company for them to ?pay your bills for you.? You will just end up deeper in the hole than you started.If you?re going to have a company negotiate your debts for you, know that you can do a lot of that yourself. But if you do hire a company or individual to negotiate for you, make sure that they are paid from your creditors. You shouldn?t pay any additional money for the debt reduction service.
Get rid of your credit cards, and stop borrowing money. That?s the most important way of living within your means.Getting a debt consolidation loan is not free. And sometimes the person who needs the loan is in the worst position to get the very loan he needs. The person applying for the loan may have a poor credit rating score already. And getting a new loan can be very difficult and expensive.
One way to use a consolidation loan is to apply the reduction in monthly payments to pay off your debt faster. If you borrow at a lower rate of interest and repay the loan over a longer period of time, you will probably find that you have extra money in your budget. Here is where you need to be cautious. Be sure to use that surplus money to make advance payments on your consolidation loan. You will then be on your way to eliminating your debt more quickly. When applying for the loan, check with the bank officer to make sure you can make advance payments on the principal.
Such a loan arrangement can have several benefits for many people: most important, the new loan has a reduced interest rate compared to the other loans. Your consolidation loan can be obtained for less than twelve-percent interest, while credit cards often bear interest rates as high as 20 percent or higher.
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Source: http://finance.redbright.co.za/live-within-your-means-with-debt-consolidation/
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