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Most Americans have a mortgage, a car loan, and credit card debt. But, what happens when your debt load becomes too heavy to manage? Rather than foreclose on your home or file for bankruptcy, you can refinance your debt. There are several popular methods of refinancing your debt.
Consolidation – You can work with your bank to consolidate all of your loans into one loan. The bank will pay off your existing debt and will hold the loan on the balance. You then make one payment to the bank instead of several to various places. Chances are you’ll be paying less in interest and penalties this way too.
Refinancing – Car loans and mortgages are the most likely loans to be refinanced. If you are currently paying a higher interest rate than the current market rates, you can approach your bank about refinancing these loans. There may be associated fees with doing this.
Balance Transfers – Shifting your credit card balance from a high interest card to a lower interest card is called a balance transfer. This is a wise thing to do if you’re paying too much interest. Cards like the Reach prepaid Card only allow you to spend what amount you pre-load onto the card so that you can’t run up vast amounts of credit card debt.
Of course the wise thing to do is to not accrue more debt than you can pay off, but if you do get into trouble with high interest rates and large amounts of debt. There are more options available, but these are just a few of the more popular ones.
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