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How can I consolidate my debt?

It is no secret that many Americans are struggling financially and are more overwhelmed by their debt than ever before. Fortunately, there are options for people who want to consolidate their debt and avoid bankruptcy. Debt consolidation allows you to lower your interest rate or lower the amount you have to pay each month.

In order to consolidate your debt, you may consider both secured and unsecured loans. Secured loans are based on collateral, which essentially means that if you fail to make your payments, the lender will be able to take something of value attached to the loan (e.g. your car, house). While you may have more to lose with a secured loan, lenders have less to lose, and therefore, you will likely get a better interest rate. Unsecured loans do not have any property attached to them, which is safer for you in that the lender will not automatically be able to take something of value away from you. However, because it is riskier for the lender, it can be hard to get an unsecure loan without a great credit history, and the interest rates are generally higher.

When deciding on how to consolidate your debt, it is important to consider your financial situation. If you have a high credit rating, you can consider low interest personal loans or 0% APR credit cards. If you can find an offer for a 0% APR balance transfer card, you can pay off your debt during the 12 to 18 months of 0% APR. However, you should be aware of balance transfer fees, typically ranging from three to five percent. You should also be aware that your credit line may not be enough to cover other debts. A personal loan may also be beneficial, as it has a fixed interest rate, unlike a credit card. However, the interest rate may be just as high as a credit card and there may be origination fees of up to eight percent.

If these are not good options for you, consulting with a credit counseling agency may be beneficial, as they can set you up with a debt-management plan (DMP). There is a small fee, but it can help you increase your credit score fairly quickly. You may also consider withdrawing money from your retirement account or taking out a loan.

With so many options, it can be difficult to know which one is best for you. Consider talking to an attorney for more information about your debt consolidation options.