For real debt reduction, plan your debt consolidation carefully

To simplify your debt, debt consolidation loans work. But when it comes to debt relief, it’s only the first step. It doesn't make any sense to get a consolidation loan without changing your spending habits, because otherwise you're simply trying to borrow your way out of debt. If bundling all your debt into one payment lowers your rate of interest it makes sense. But you can end up paying more in the long run if the interest rate is only lower since the term is longer.

{|Source for this article: For real debt reduction, plan your debt consolidation carefully by Personal Money Store

Preparing can make debt consolidation worthwhile

It takes careful planning to set up debt consolidation that saves interest and reduces debt faster. Numerous free debt consolidation calculators are available online. A debt consolidation calculator helps you consider all the factors that determine whether it makes sense to consolidate. Make a plan of action by experimenting with a variety of interest, payment and term combinations.

Top opportunities for debt consolidation

There are many different ways to go about debt consolidation. Some of the best debt consolidation possibilities are listed by M.P. Dunleavy at MSN MoneyCentral. When you have equity with your home, explore a home equity loan. The interest paid is tax deductible on a home equity loan, and it carries a fairly low interest rate within the high single digits. Refinance your car, a secured loan, and use the additional cash to pay off debt. A personnel loan to pay down credit card debt is a great choice, with less interest than you are paying to the credit card company.

Debt relief can grow like a rolling snowball

Numerous financial advisers think that you need to plan on keeping debt payments separate for debt reduction. Debt reduction guru Dave Ramsey advocates the "snowball approach". Debts are paid off in full one at a time, from the smallest to the largest with the snowball approach. List your debts in order from small to large. The smallest balance should be your number one priority. The snowball approach motivates you with success by paying off the simplest debts first. However, keep in mind that for the snowball approach to work, it takes many budgeting and saving discipline.

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