The Hard Reality of Debt Reduction
You're in debt, and it's time to wake up to the simple truth you
can't just put all your debts into one loan and expect the lower
interest rate to take care of the rest. If you want to pay the bills
and save money too, you need to carefully look at all your options,
come up with a solid plan, then cut your expenses over time. The
most important keys to success in any debt situation are to keep
your overall costs down, make a plan that gets you out of debt in 3
to 5 years, read all the fine print to avoid nasty surprises, and
don't take an offer that sounds too good to be true.
Video: Tips on Debt Consolidation
Options for Homeowners
After you have been in your home for a couple of years and have accrued a bit of equity, you have three pretty decent options – refinance your home and take some cash out if you need it now, get a home equity line of credit, or take out a home equity loan. Although you will be putting your home on the line, it could be well worth it to save on that interest rate, so long as you can definitely control your spending from here on out. Also try not to lengthen the time you are in debt, since it may end up costing even more overall, and don't spend the money freed by refinancing or tax refunds for the mortgage – instead, set up an emergency fund and pay more on your home loan or retirement.
Credit Card Options
If you've been a good card holder and paid all your bills on time, your creditor should be pretty willing to cut you a deal – you just have to call and ask. It is a lot cheaper and easier to keep you than find another customer, so even if the first person you speak with doesn't seem too sympathetic, ask for a supervisor, or call another day. You will want to focus on a few key issues – a good rate on new balance transfers, waiving the balance transfer fees, lowering the interest rate on new purchases, and waiving the annual fee. Just keep in mind it might not work, especially if your payment history is less than perfect.
Borrowing From Your Retirement
If you have a 401(k), 403(b), IRA, or stocks and bonds, you can borrow from them – but don't withdraw. Withdrawing from a pension plan or keeping funds from an IRA rollover longer than 60 days will cost a hefty penalty plus taxes, so be sure you repay anything you borrow on time. Also be aware that taking a margin loan against your stocks and bonds is risky – you could get caught in a “margin call” and have to repay the loan immediately, so don't borrow more than 20 to 25% of your investments. On the upside, these loans don't require a credit check, and have pretty low interest rates.
Personal Loans
You could borrow from a friend, family member, private lender, bank, or credit union. Borrowing from a friend, family member, or other similar private lender allows you to negotiate a lower rate than you could get at a bank or credit union, fetches a higher rate for them than a savings account, and may allow for tax perks. Just be careful not to ruin your relationship by not repaying, and speaking with your favorite tax advisor before finalizing everything and help with getting it in writing. When you borrow from a bank or credit union, your chances are better if you secure the loan, have good credit and have been a customer for a few years. The rates are higher, but you can try to use the “if you want to keep my business” card to negotiate a better deal.
Video: How to decide if a Personal Loan is right for you
Additional Resources
Auriton Solutions
(877) 322-8777
Consumer Credit Counseling Service Of Los Angeles
(800) 750-2227
National Budget Planners Of South Florida
(954) 785-8618
Tides Foundation
(415) 561-6400
Family Debt Arbitration
(603) 483-0593
Commonwealth Catholic Charities
(804) 285-5900
Ifmc Down Payment Asstnc
(386) 668-3636
Blue Haven Capital LLC
(630) 588-3800
S C Ministry Foundation
(513) 347-1122
IA Global Inc
(813) 261-5157
Mass Housing Investment Corporation
(617) 850-1000
Cape Ann Commercial Fishermans
(978) 283-2959
Global Financial Partners Inc
(813) 261-5116
JP Morgan Investor Service CO
(617) 557-8000
Patient Financial Concepts
(973) 396-2668
Clinton Global Initiative
(212) 710-4400
Financial Supervisory Service
(212) 350-9388
Chautauqua Opportunities Inc
(716) 664-4999
Greenpath Debt Solutions
(574) 293-0075
Consumer Credit Counseling Service
(505) 884-6601
ClearPoint Credit Counselors Solutions
(800) 737-2933 800
Lonnie Bowman Ministries
(229) 446-1664
Family Foundations
(904) 396-4846
Solidary Credit
(305) 406-0188
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