According to a 2019 study, the typical American carries an average personal debt of $90,460.
This number includes anything from car loans to home loans to credit card debt and beyond.
How do you get from here to debt-free? Should you put all your loans together to form one loan? Where should you start?
Keep reading to learn more about the best loan to consolidate debt.
- Consolidate Your Credit Cards
If most of your debt is tied up in credit cards, this could be a good option for you.
To do this, you must apply for a personal loan. The goal of this consolidation is to get an interest rate lower than what you currently pay on your credit cards.
By having a lower interest rate, more of your payment will be going toward decreasing the total loan. This will help you to pay the loan off faster than you would with multiple credit card debts and individual interest rates.
- Borrow From Your Retirement Plan
Taking money that you have contributed to your 401k and using it to pay off your current debt is another option.
While it may seem counter-productive to take away money that you have saved, using it to pay off high-interest debt can save you more money long-term. You will be required to pay the money back but can do so after you are debt-free.
This option allows you to attack your current debt with savings that aren’t utilized while you are working. The rules for this differ from employer to employer, so you will need to check what your current employer allows you to do with your 401k.
- Home Equity Loan
You can combine your loans into a home equity loan. This type of loan uses your house as collateral if payments are not met.
While you can save money on your monthly payments by getting a home equity loan, it is a risky option. Failure to pay this loan off will have more serious consequences than the current high-interest rates that you are paying. Carefully consider your debt and how likely you are to make the payments before looking into this option.
- Combine Your Bills
Several companies offer options to combine all of your bills into one place.
While this may seem like a simple idea, it is typically not the best solution to consolidate your debt. They will offer you a low-interest rate but the length of the loan is much longer.
Paying attention to the terms of this type of offer will help you know if you are actually saving any money by combining your bills.
- Debt Consolidation Loans – The Best Loan to Consolidate Debt
In order to consolidate your debt, you should be looking at loans that are specifically designed for that purpose. Here is a list of loan consolidation options that are known for their success with debt consolidation.
Choosing a debt consolidation loan will help make the process of becoming debt-free more simple because you will have all of your loans in one place.
Consolidate Your Debt Today
With every passing day, you will continue to pay interest on your existing debt. Find the best loan to consolidate debt and start your journey to becoming debt-free today. Check out our blog for more helpful articles like this one.
