If you’re facing bankruptcy, credit card debt is unsecured and typically discharged more easily than a home equity loan. Unsecured debt consolidation loans don’t require collateral, and they usually have easier approval requirements than secured debt consolidation loans.
Before you apply for a debt consolidation loan, you should consider alternatives, figure out how you’ll make payments and make sure you’re finding the best rate available.
Credit cards with zero percent APR on balance transfer offers allow you to transfer existing credit card balances to that new card. It’s essential to have a plan for how you can make the new payments, especially if you’ve previously struggled to keep up with minimum payments on your balances.
Track your spending to see where your money goes each month, identifying areas where you may be able to cut back.
Compare your debt payment obligations and your spending to create a budget and determine how much you can realistically pay on your debt each month.
For the length of the introductory period, you can make payments to reduce your balance without accruing interest. To avoid missed payments, penalties or default, you’ll need to create a budget that allows you to make payments on your debt consolidation loan.
Assess your current debt total by listing out your debts, including credit cards, student loans, car loans and any other accounts.
Once you know how much you can realistically allocate to paying down your debt each month, you can use the amount to determine terms for your loan.
The amount you pay on your debt consolidation loan each month will vary depending on the amount you borrow and how many years you will take to repay it.
Home equity debt consolidation loans, a type of secured debt consolidation loan, offer a fixed interest rate.