It is not uncommon to have outstanding debt. It is also not uncommon to owe money to more than one creditor. Car loans, mortgages and credit card bills are all forms of debt owed to different entities. Still, if you have various forms of current debt each with differing amounts of interest, it may be beneficial for you to consolidate your debt. Consolidation may provide you with one low interest rate and one single monthly payment. But how can you consolidate without hurting your credit? Here are some insights regarding how you can consolidate your debt while minimizing or completely eliminating any damage to your credit.

Debt Consolidation Services

There are a number of businesses that offer debt consolidation. What is important to note about these services is that many of them are businesses that are trying to profit from you. Not all businesses are created equal and some are worse than others. Additionally, some debt consolidation services turn out not to consolidate debt at all. Rather, you are advised through these services to stop making payments and to begin depositing money into a savings account which is then possibly used to settle with your creditors. While this process may reduce your overall debt, it can have a devastating effect on your credit.

There are legitimate debt consolidation programs which offer unsecured loans to be used to pay off your existing debt. You then make monthly payments on the new loans at a fixed interest rate. The loans have varying terms. Some have no prepayment penalty and require only a soft credit check.

Do-It-Yourself Debt Consolidation

While debt consolidation services can work for some, there are several different ways to consolidate debt completely on your own. One of the most effective ways to consolidate debt on your own is to open a zero percent interest credit card if you qualify. By using this card to pay off higher interest debt, you rearrange all of your debt into one form without accumulating additional interest. This further allows you to make only one low monthly payment for all of your debt. It is important to note that zero percent interest often only applies for an introductory period. Once that period expires, the interest rate can jump to an astronomical level, with many borrowers having to pay more than 20% annually.

Another form of DIY debt consolidation is taking out a home equity loan. If you own property with equity, lenders may allow you to borrow against that equity in the form of a low interest loan. You can then use that loan to pay off your existing debt and consolidate it into one monthly payment. Depending on your credit score, home equity loans may offer lower interest than what you are currently paying on your unsecured debt. Still, it is important to understand that defaulting on your home equity loan may result in foreclosure on the property that you use as collateral to secure the loan.

Florida Bankruptcy Lawyers

If you are contemplating filing for bankruptcy, modifying your mortgage, or are facing unmanageable credit card or student loan debt, The Bankruptcy Team, PLLC is here for you. Our experienced attorneys will thoroughly review your situation and advise you about meaningful solutions. Our experienced attorneys will thoroughly review your situation and advise you about viable solutions. To consult with The Bankruptcy Team, PLLC, call or contact us today.