Debt Consolidation Principles   by Yvette Stokes

in Finance / Debt Management    (submitted 2010-12-13)

Debt Consolidation Principles

We often hear of debt consolidation, but what does it really mean? Debt consolidation is the sum of all your debt – totaled and payable to one place. By consolidating your debt in one location you are essentially making it easier to manage. Ideally, the place that you choose to consolidate your debt will have a low interest rate.

To get the lowest interest rate you must consider the lender. Remember the more risk a lender takes the higher the interest rate. With that in mind, consolidating debt on credit cards might not be the best solution. Credit cards often offer low introductory rates that spiral to higher rates within a year. If your debt consolidate repayment plan will exceed the time of the introductory period, consider that factor before using a credit card to consolidate your debt However, if you have an existing credit card with a low interest rate that you have not exceeded the credit limit – that credit card may be an option for you. Lower interest rate are usually granted when you use an asset as collateral. Therefore, a home equity loan or home equity line of credit is often a better choose verses a credit card.

Using a home equity loan to consolidate your debt has its benefits. One major benefit is the lower interest rate. Another benefit is that in the United States mortgage interest is tax deducible. These two reasons make using a home equity loan to consolidate your debt more attractive.

In short, whether you use a credit card or a home equity loan to consolidate your debt, consolidating your debt is a positive finance move. Ideally, you will want to get the lowest interest rate you can. Remember, you are consolidating your debt not creating more debt. With that being said, you should not be borrowing more than is needed to consolidate your debt.

About the Author

I have been providing revised and innovative data & information processing services since 1997. My client's enjoy online and offline cost effective off-site solutions for their changing technology needs. I also have been blogging since 2007. Most of my articles are about Financial Matters, Internet Marketing, or Data related. You can visit my core site at YS Data