With so many people in Hawaii facing debt challenges, you may be searching for a solution that will lead to being debt free. Among the many solutions people have been looking into is debt consolidation. There are several forms of debt consolidation, but none of which are that appealing when you take into consideration the ways in which it will affect you overall. Make sure you are considering your options completely in order to get the kind of help that will actually lead to getting out of debt.
Debt Consolidation Using a Second Mortgage
Homeowners are often lured into the idea of getting a home equity line of credit in order to pay off debts. While this may give you all the money you need to pay off your creditors, it may create other problems you do not need. The first problem is that you will need to pay the closing costs on this kind of a loan. Second is that with all of your credit now in one loan, you may start giving yourself permission to use your credit cards again. This in essence means that you are simply creating more debt rather than eliminating your old debt.
Zero-Interest Credit Cards
Many credit card companies offer a zero percent APR for anyone signing up to get a new card. This gives you the ability to use the credit card to pay off your existing high interest cards. However, it also means that you now have a single card where all your debt is. What happens when the zero percent promotion is over? What does the APR go to at that point? This is a very important consideration to make sure you are getting the best deal.
Debt Consolidation Loan
The most common way for people to consolidate their debt is through a debt consolidation loan. This is a loan that is supposed to bring all of your debts together into one loan that has a lower interest rate than even your lowest rates. This is not always the case. When considering these kinds of loans, make sure to do your homework as to what interest you are actually paying on the total debt. You may discover that you are actually losing money this way. Another consideration here is that a debt consolidation loan can be worse for your credit than going through bankruptcy.
Take all of this into consideration before trying to consolidate your debt. You may find that going through bankruptcy is actually a better solution in the end, because it allows you to reduce debt rather than build new debt.