Consolidating multiple debts into one payment can make paying down your debt more manageable and can also save you a lot of money in interest charges. Instead of juggling multiple payments you can focus on one debt. There are several debt consolidation options that you can consider.
If you own a home and have equity built up, you can consider taking out a home equity loan to consolidate your debt. The interest rate will most likely be lower than on your other loans and the interest you pay on a home equity loan is tax deductible. The disadvantage is that you will have to put your home up as collateral for the loan and are taking the equity out of your house.
Another debt consolidation option to consider it taking a loan out with a local credit union. Credit unions often charge lower interest rates than other lenders.
If most of your debt is credit card debt you can look into the option of finding a low interest rate credit card and doing a credit card balance transfer to move your credit card debt to a new card with a lower rate. You need to first make sure that the lower rate is not just an introductory rate and figure out what the balance transfer fee will be to make sure this strategy will save you money.
You can also consider working with a nonprofit consumer credit counseling service to consolidate your debt. They can help you with budgeting and financial advice and can also negotiate with your creditors for you to help get your interest rates on your debts lowered and possibly get late fees waived as well. You can set up a debt management plan with a credit counselor where you agree to send a certain amount of money each month. They will in turn pay your lenders back out of this money.
If you own a whole life insurance policy it may be possible for you to borrow against the value. You will not have monthly payments to pay the loan back, and you aren’t even obligated to pay the money back if you don’t want to. The only disadvantage would be that it would reduce or eliminate the funds available to pay your beneficiaries on the policy.
As a last resort you can borrow money from relatives or friends to consolidate your debt. The major drawback with this is if you are unable to pay them back it could put a big strain on your personal relationship.