Digital News Report – There are many options available to people considering debt consolidation, but first the consumer needs to ask some fundamental questions.
How many obligations are outstanding?
How many bills need to be paid?
How high are the interest rates?
Some Americans have three or more credit cards they are working on. They may have one or two car loans, furniture loans or other personal obligations. Some credit cards have rates of 30% or more.
Consumers with multiple outstanding debts at high interest are the ones who should consider a debt consolidation loan.
Check your credit score before applying for a loan. Dispute those items on your report you believe to be a mistake. Even if there is an erroneous address on your credit record, dispute it.
There are two basis types of debt consolidation loans: secured and unsecured. There may be some tax advantages to consolidating debt into a home loan, but always check with your tax professional before making that decision.
“Interest payments on home equity loans or lines are potentially tax deductible, but credit card and auto loan interest payments are not,” Chase said in a statement.
Some borrowers need to consider a Debt Management Program (DMP). Counseling agencies will take your payment and pay each of the creditors. The good news is that this method will get you out of debt within five years, but this could negatively affect your credit score. You may be required to close all your credit cards.
Rather than borrow money against a home, some consumers should consider using their car, retirement plan or other valuable as security. In some cases, no credit check is required. Of course, you need money in a 401(k), 403(b) plan. You can not borrow against an IRA. The maximum term of this type of loan is 60 months.
By Tina Brown