3 Alternatives to Debt Consolidation Loans

Debt consolidation loans are a popular means to attacking debt problems in the world today. Many people use these instruments in order to focus on their debt and effectively eliminate it. While they can be beneficial, they are not the only option available. Here are a few good alternatives to using a debt consolidation loan to eliminate your debt. 

1. Home Equity Loan

The home equity loan can be very beneficial if you have debt problems. With this type of loan, you are using your home equity to pay off your debt. You have earned your home equity over a number of years and this could be a great way to use it if you need it. With home equity loans, you will most likely be able to get a lower rate of interest than you could for a personal loan. Therefore, you will be able to save money on your monthly payment and on the overall cost of the loan. In addition to saving money on the loan, you will also be able to save money on the back end. With a home equity loan, you can actually deduct the interest that you pay on your income taxes. This will result in giving you a bigger refund or lower the amount that you owe at the end of the year.

2. Debt Management Plan

If you can not qualify for a loan, you may be able to succeed in eliminating your debt by using a debt management plan. With this type of plan, you contact all of your creditors and speak to them about your intention to pay off their debt. You let them know exactly how much you can afford to pay them each month and ask them to reduce their interest rate. In most cases, if you are late on your payments or are at risk of bankruptcy, they will accommodate your request. 

You do this with all of your creditors and then send them all the same amount every month. Eventually your debt will be eliminated and you can get back on track. You are still paying off all of your debts with this method, but you will usually be able to get an interest rate reduction. There are a number of companies out there that will help do this for you, if you do not feel like doing all of the work yourself. They will contact your creditors and negotiate the plan for you. You will pay them each month and they will in turn pay your creditors for you. 

3. Debt Settlement

Another option that you may have is debt settlement. With this option, you negotiate a cash settlement with your creditors. They will reduce the amount that you owe them in return for a one-time cash payment. For this method to work, you need to have some cash on hand already. Therefore, it may eliminate many people that could implement this strategy.