How to Reduce Debt Without a Consolidation Loan

By Eric K Frey

When people feel like their financial planning is spiraling out of control, they often quickly seek out a debt consolidation loan. Although that may be the correct choice to make, these 8 options should be considered first.

1) Consider selling assets to clear your debt. Rather than rescheduling your debts, see if there is any way you can repay some or all of your debts yourself. Sell unwanted valuables and other items. Depending on the item you can sell to dealers, advertise in local classified ads or through Ebay. Sell unwanted books through Amazon. If your debts are very high and you own your own home consider downsizing to release equity.

2) Pay as much as you can towards your credit cards. If you are able to make your minimum credit card payments you should consider how much additional money you can pay off each month. Reduce excess spending wherever possible and pay as much as you can on your credit cards. If you don't settle for making just the minimum payment, you can make a significant impact in your debt over the course of 12 to 24 months. If your debt situation makes it difficult to meet the minimum payment, a consolidation loan may be easier for you to manage.

3) If you own your own home, the lowest interest rates are obtainable by taking out a new mortgage to pay off your existing mortgage (if any) plus enough funds to repay you other debts. If repaying your existing mortgage will result in penalty charges consider a 2nd mortgage with your existing lender. The interest charged will probably be slightly but not significantly higher.

4) Consider a secured loan from a different lender. Missing and late payments can have a very negative affect on your credit score. This can potentially make your mortgage company hesitant to give you a second mortgage. However, by getting a new lender and using your house to secure the loan, you will likely be able to receive a loan at a decent rate. However, only use your home to secure a loan if you are positive that you can make the payments. If you miss payments, the lender will quickly try to repossess your home.

5) Assets other than a home can also be used to secure a loan. If you don't own a home or any other real estate, but you do have a fancy car or nice boat, it is possible to use these pieces of personal property as security for a loan. It is important to consider the interest rate on the loan though. A loan secured by assets other than real estate typically has a higher interest rate.

6) Go for an unsecured loan. An unsecured loan might be a good choice if you don't have any valuable property or do not want to use it as security for the loan. Unsecured loans a generally repaid quicker than secured loans and usually have higher interest rates as well. Therefore you will have to make higher monthly payments on the loan, especially if you have a low credit score.

8) Low interest credit cards. When your debt is not too high and your credit score is pretty good, you will probably be able to apply for a credit card with a low interest rate or even a 0% rate on balance transfers. A credit card may actually be able to offer a better rate and you would find on any loan. However, be prepared to pay off the balance of during the transfer period or you could end up with an even higher rate.

8) Learn about the options. The best thing to do before reaching any decision is to thoroughly research each possible choice. One option may be clearly the best, but for many people the various possibilities can be confusing. So, check them all out as best you can. Call different banks or mortgage companies to see what they can do to help you and ask for solid numbers that you can compare. Just asking doesn't commit you to anything, and they may help you decide the best solution for you.

For a great many people debt consolidation provides an ideal solution to excessive credit card debt. Sorting out debt problems takes a little time, effort and determination. Once you've sorted your debts you will find life more enjoyable and relaxing and, with no debt collectors calling or contacting you by post or phone, much less stressful.

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