How to Consolidate Your Debt in Four Easy Steps

Although you may work hard every month in order to pay your bills, you may be throwing your money away month after month on interest. There are four steps you can take to take control of your finances and help consolidate your debt so that you can be on your way to financial freedom.

Consolidate all of your student loans

One of the easiest things you can do to save money is consolidate any student loans that you have. There are several different companies and websites that allow you to consolidate your student loans at a low fixed interest rate. Additionally you will only have to worry about paying for one bill a month rather than the two, three, or four different loans you took out while pursuing your degree. Chances are that when you do consolidate your student loans, you will have a lower monthly payment to make as well, because it will be spread over a longer time period.

Consolidate all of your credit cards

Credit cards can be a blessing or a curse, and if you are stuck paying a high interest rate on a large balance then it is time for you to turn your bad luck into fortune. By simply doing a balance transfer from a credit card that has a higher interest rate onto another credit card with a lower rate, you will be able to save money on your monthly bill. You probably receive letters in the mail saying you are pre qualified for another credit card. Do not throw them away! Although you may not need another credit card, if you can get one that has a low introductory rate of zero percent for a year or more on balance transfers, you should take it. The money that you save each month on the interest can be applied towards the principal balance, paying off your debt quicker.

Refinance your mortgage

A fantastic way for homeowners who are struggling to meet their bills each month or want to consolidate their debt is to refinance their mortgage. By refinancing you may be able to acquire a lower interest rate, saving yourself thousands of dollars over the course of the loan. If the interest rates are higher than you are currently paying right now, consider extending the term of your loan so that you have a lower monthly payment, allowing you to free up capital.

Open a home equity line of credit

A final option is to take out a home equity line of credit against your home to pay off any debt that you may have accrued on credit cards or from other sources. One of the perks of a home equity line of credit is that some of the interest may be tax deductible off of your income, whereas any interest paid to a credit card is thrown away.

Remember to pay your bills on time

If you've decided to choose one of the mentioned options to consolidate your debt, then the most vital thing to remember is to pay your bills on time. You should consider signing up for auto-debit so that you never miss a bill. The last thing you want to do is ruin your credit by making a late payment.