Consolidation of debt can vary from individual to individual, depending upon needs and financial circumstances. When you have balances due on several of your credit cards, paying everything off could be a huge task. It would most likely be difficult to make progress in your future financial decisions, knowing that you have several other loans to pay off.  A suitable debt consolidation would be the perfect answer for you.

However, before taking the plunge, you need to understand what works best for you. National Debt Relief can help you out if you need any help with any of the below. Although research is important, a good debt consolidation program should include a few or all of these features –

1. Low to no fees
2. Free consultation
3. Less impact on your credit score
4. Financial peace of mind
5. The possibility of paying off all your debts in 3 to 5 years

The 4 ways to Consolidate your Debt

1. Borrowing funds from family or friends

This is one of the most suitable and effective ways to avail funds without going through the struggle of visiting lenders and paying a huge amount of fees. This way you are able to pay off your individual debts, and eventually, pay off you’re your friends or family.

However, some might not buy the idea of borrowing money from their family and friends, and might find it to be uncomfortable. At such times you need to sit down with them, discuss your savings, loans, budgets and debts. Once they have a clear understanding about everything, and they know that you have the ability to pay them back, they may be willing.

Always keep in mind to not ask help from a family member or a friend who is struggling financially.

Assessment:

This method has several pros such as low interest fees, flexible payback terms, no origination fees, etc. However, one of the biggest cons of this method is you may lose out on a cherished relationship with your family member.

2. Debt Consolidation Loan

A debt consolidation loan is taken solely for this purpose. This loan helps to combine all of your debts into one single debt, which enables you to make one single monthly payment. These loans are offered by several banks as well as debt consolidation companies.

Assessment:

A debt consolidation loan acts as a positive aspect for your credit score as you are able to knock off slowly all your loan payments with just a single payment. You are also able to clear off your loans within 3 to 5 years. Although, be sure to check their terms and conditions, some of these companies tend to charge huge sums of money as fees, which can make the loan even more expensive, always aim to save money with your debt consolidation loan.

3. Debt consolidation with a Personal Loan

A personal is a loan granted by banks or other financial companies, which you can pay back over a well-defined period of time. Your credit score plays a very important role when you opt for a personal loan, as such loans are granted after taking your credit score into consideration. It is an unsecured debt and is not backed by any collateral. A personal loan helps you to pay off you’re a number of your smaller debts and then one payment every month for your personal loan interest and principal payback.

Assessment:

Most personal loans are for a period of 3 to 5 years and there are a number of lenders to choose from. It’s an effective way to get out of debt, as it helps you to make minimum payments without putting a dent on the total amount owed.

However, the worse the credit score, the more difficult it is to procure a loan. If your credit score is not up to the mark, you may end up being charged higher rates of interest.

4. Borrow a life insurance policy

It may not be the most suitable way to consolidate debt. However if you have to choose between bankruptcy and borrowing from your life insurance policy, then the latter one is more suitable. If you are unable to repay this loan, your death benefit will be used to pay off this debt and your survivors may not get anything at all. You can borrow up to a specific cash value of the policy and use the proceeds to consolidate your debts.

Assessment:

Although it may not be the go-to option, one needs to break all odds in order to avoid bankruptcy.

Conclusion –

The best way to consolidate a debt is to choose a method that avoids taking additional debts. You could also take the help of a credit counselling agency to consolidate unsecured debts. These agencies get in touch with your creditors to reduce the rate of interest on loans and eliminate extra fees, thereby making it easier for you to pay off your debts quickly.