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What are the Best Ways to Consolidate Debt?

Finding yourself in a lot of debt is never a fun ordeal, especially if you’ve let the problem go on for a while and don’t see a viable way out. The truth is, most of these situations can be addressed in one way or another, you just need to know what tools are available at your disposal and how to use them properly. Debt consolidation refers to the process of combining all your currently outstanding debts into one and paying it off on its own.

Debt Consolidation Loan

A debt consolidation loan is the simplest approach to the process – it involves taking out a new loan that’s going to cover all your existing ones. You can then focus on repaying the new loan that will hopefully come with a more attractive interest rate and other benefits that should make the situation simpler for you. The biggest challenge here comes down to finding a good offer from a lending institution. We can use consolidation loan calculator to check a realistic view of their finances.

New Credit Card Balance

Similarly, you can take out a new credit card and charge all your current debts to it. This will allow you to just pay off the credit card’s own balance, which should give you much more freedom and flexibility, especially if you also get to use the card for other purposes. Keep in mind that a credit card can quickly start piling up more debt on you if you’re not careful, so try to pick one with a good interest rate and a rewards plan that makes sense for your specific situation.

401(k) Loan

If you’re currently employed and have a 401(k) plan, you should talk to your employer about borrowing against that. There are usually some pretty strict terms and conditions you’ll need to comply with, and repaying that loan might be even more challenging in the long run than your current ones combined. That’s why you should do your calculations very carefully before proceeding with this. The good news is, when it does work properly, it can be one of the easiest ways to resolve your situation.

Counseling Services

Not sure how to even get started? That’s why debt consolidation counseling services exist. They are professionals who can guide you through the process from start to finish, and you just have to follow their instructions and make sure that you are sharing the full picture with them, rather than concealing some parts of it. When used correctly though, a debt consolidation counseling service can be one of the easiest ways to get out of a problematic situation, and a reliable solution in the future if you ever run into such a problem again.

Hopefully you won’t though – if you’re smart enough about your finances, you should never allow yourself to be in such a compromising position in the future once you’ve addressed the situation once. Knowing how to handle your finances properly is a skill like any other, and as time goes by, you should find yourself getting better at it, and making smarter decisions that benefit you in the long run.

 

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This post is from a series of posts in the group:

Financial Inclusion

The financial services industry has much to contribute to the UN and World Bank goal of full financial inclusion by 2020. This group will focus on industry contributions, ideas, barriers and enablers.


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