There are times when your debts start to get out of control despite your best intentions. Even when you are careful with your credit cards and loans they can start to add up and put a lot of pressure on your financial situation.
Accidents happen, emergencies crop up and there are always unforeseen expenses. That’s what credit cards are supposed to be for. When things do start to become unmanageable, it is time to think about going for a debt consolidation plan.
In this article, we will go over what your options are for consolidating your debts so you can get back on track.
Home equity loan
If you are a homeowner and have been for a few years then you can leverage the equity you’ve built up in your home to pay off your debts. The equity is the value that has risen for your home minus the money that you still have left to pay for your mortgage. For instance, if your home is valued at $300,000 and you still owe $200,000 on the mortgage then you have $100,000 of equity built up that you can access using something like AMF Equity Loans.
There are some good reasons to do this but the biggest among them is that you are likely paying a much lower interest rate on your mortgage than you are paying on your credit cards. Consolidating your loans with an equity loan can end up saving you quite a bit of money together with having your debts all in one place.
If you are often paying late fees or missing payments then this loan will help bail you out, keep your head above water and save you so much money.
However, there are risks involved, of course. If you are in serious financial trouble from losing a job or having a long illness, then you could risk losing your home if you take this loan to pay off your debts. Make sure that you don’t have a huge financial burden that is going to put your home at risk if you fail to pay the debt.
Peer to Peer loans
P2P loans are gaining in popularity as it is a great way to avoid having to deal with a bank when you want to consolidate your debts. The way that it works is that you are borrowing money from another person instead of a bank. Using an app or website, you are matched with a lender based on your needs.
You simply request how much money you would like to borrow, how long you need to repay it and what interest rate you are comfortable with. Then the algorithm will find you the right lender who is willing to loan you the money according to your terms.
The downside to this is that the process can take a while as there may be lenders competing for you if you have a good borrower’s rating. This can work in your favor as the interest rate may end up being lower than you expected but it may take longer than you expect.