Using Debt Consolidation To Improve Your Credit

By Kevin / November 2, 2016
break free of debt

There are so many options out there today for you to achieve your financial goals and to get your credit back on track. Debt consolidation is becoming a growing trend these days because of the economic situation and the over spending in which some people have a tendency.

While it can be a viable solution to regaining a good credit rating, there are some basic factors that will determine if it will be a permanent solution or a temporary aid that works as a bandage simply for the time being.

Using Debt Consolidation To Improve Your Credit
Photo by: TobTob | Debt consolidation can help you break free from your debt.

The Main Factor

The biggest factor in getting your credit situation under control and back on track will be the attitude and approach that you take when doing so.

Discipline and self-control will be necessary, first of all, in curbing your spending habits. This will be solely in your hands to determine whether debt consolidation is going to be a temporary fix or a change that will be permanent.

Getting your credit back on track and starting fresh will be advantageous, if you do not fall back into the hole that you are trying to climb from at this point.

Some of the ways to consolidate all of your debts into one single payment include getting a home equity loan, a personal line of credit or combining your debts into a zero percent interest credit card.

The personal line of credit and certain credit cards may be difficult to obtain if you are in serious credit trouble. For the most part, however, any of these avenues are good paths to take in order to get your credit back on track.

Don’t Forget About Your Home Equity

A home equity loan will require homeownership and is a good way to let the equity in your home help you with paying off some of your debts.

Obviously, there must be a certain level of equity or value left in your home to consider this an option. You can check with your current mortgage holder to see if you qualify for this type of consolidation.

This kind of second mortgage for debt consolidation, however, will add to the amount of money that you will owe in the long run.

Be very careful when using this tactic to regain your credit though, because if things go badly and trouble hits again, you could possibly lose your home.

Balance Transfers

Balance transfer cards offer another very good option to consolidate your debts and get your credit back on track. Why? These cards offer a low interest rate for an introductory period, which is often 12 months or more. That gives you added time and ability to pay off you current outstanding balances.

Some people don’t have a house to use for the home equity loan and not the type of credit that is required to qualify for the personal line of credit.

For these people, a zero percent interest credit card is an excellent choice.

Good judgment and prudence will be necessary on your part in order to stay out of the red when using this avenue. Those introductory rates will not last forever, so pay attention to the amount of time that you have to work with when getting your credit back on track.

Needless to say, the discipline factor goes with this option, as well.

Although debt consolidation does help many consumers, there are also major risks to be considered. If you happen to fall back into old habits. However, if you have a desire to truly get out of the red and can be disciplined enough to stay out of the red, then debt consolidation can be your solution for getting your credit on track.

Leave a comment: