Managing multiple debts can feel like juggling with too many balls in the air. Debt consolidation offers a strategic approach to simplify your payments and potentially save money. Here's how to do it right.
Debt consolidation combines multiple debts into a single loan with one monthly payment. This strategy can:
Unsecured loans specifically for debt repayment. Best for credit card and medical debts.
| Pros | Cons |
|---|---|
| Fixed interest rates | Requires good credit |
| Predictable payments | Possible origination fees |
Cards with 0% introductory APR periods (typically 12-18 months).
"A well-executed balance transfer can save thousands in interest, but requires discipline to pay off during the promo period."
- Sarah Johnson, Certified Financial Planner
Using home equity loans or HELOCs for high-interest debt.
Borrowing from 401(k) or other qualified plans.
Important: Understand the risks of reducing retirement savings and potential taxes if unpaid.
Non-profit credit counseling agencies can negotiate with creditors.
Saved ₹1.2 lakh in interest by consolidating ₹5 lakh debt at 8% instead of 18-24% APRs.
Went from 7 payments/month to 1, reducing stress and late fees.
Improved credit score 80 points in 6 months through disciplined consolidation.
Even after consolidating, continue making the same total monthly payment amount to pay off debt faster. Any extra goes directly to principal!
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