A Lot Of Debt Built Up Due To COVID? Do A Debt Consolidation To Help You
If you lost your job during COVID and had to resort to using credit cards or getting a loan, all of this can add up. Having several payments each month can get overwhelming, and you may feel like you are paying out a lot of money. One way to make things much easier for you and, in most cases, to give you a lower monthly payment is to do a debt consolidation. Below is information about what debt consolidation is and how it is done.
Debt consolidation is simply rolling all your debt into one payment. For example, if you have three different credit cards and one personal loan, instead of writing four checks per month you will only have to write one. You can do a debt consolidation through a consolidation company or through your bank. You do need to make sure the consolidation loan has a low interest rate to help you have lower payments and pay much less in interest.
If you have been getting harassed by creditors and/or have very high debt, you should hire a debt consolidation attorney to help you.
How it Works
There are different types of consolidation loans that you can choose. One is getting one credit card with a very low interest rate — and sometimes with zero percent interest — and transferring all your debt to that one credit card. You will have to pay the balance within a set amount of time. You do have to have a good credit score to be qualified for this type of consolidation loan.
Another option if you do not have a high credit score but still have a pretty good one is a fixed-rate loan. You use the money offered to pay off your loans and credit cards. You then pay the money back in installments for a certain length of time. For example, this may be $200 a month for 48 months. If you choose this and have a good credit score, you will have a lower interest rate, so either option would be good for you.
Another consolidation loan uses your home as equity or your retirement loan, such as your 401(k). This would be an option if you have a very bad credit score. There is a lot of risk involved as, if you do not pay the money back, the loan company or bank will take your home away from you or use your retirement account to cover the debt.
The debt consolidation company or bank and the attorney that you hire can give you much more information about consolidating your debt.