Solid consolidated credit solutions include reviewing your budget (looking for ways to save) and sometimes consolidating your debt! Taking a consolidation attack at improving your finances and credit will involve reviewing your budget, finances, credit, lifestyle, habits and more.
A multi-lateral plan will have to be drawn up and employed when creating your own consolidated credit solution. Here are some things you can do as part of your consolidated approach to improved financial health.
Request your credit report with your FICO Score (your credit score) to see what your credit looks like. Write down the different credit products, their interest rates and current balances.
Create a budget. Start by listing all of your monthly expenses from car insurance to groceries to wine. From there, look for ways to reduce your budget by 10% in each category.
If you own your home, start a relationship with a mortgage broker. You can make an appointment, where you will bring in your credit report and budget, ready to build a financial plan. If you own a home it could be the key, the final component of your consolidated credit solution.
Your home presents valuable security to a bank or any other lender that may enable you to obtain a consolidation loan at a low interest rate.
When considering using the equity in your home to consolidate your debt, it’s important to make informed choices. Yes, if you refinance your debt into your mortgage the interest will be much lower, however the amount of time you amortize your mortgage could have a counterproductive effect.
If refinancing your first mortgage to consolidate debt, consider reducing your amortization by a few years. This will only increase your payment slightly but at the same time it will reduce your overall interest significantly.
You could also consider a second mortgage, one that stands independent of your first mortgage. With a second mortgage, the interest rate is slightly higher but keep in mind that you can amortize it more aggressively and at a payment that would still be much lower than what you are paying to your creditors now.
As you can see by the points outlined in this article you have many choices when it comes to building your own personal consolidated credit solution. A good plan will ensure that you review all of your options and really come up with a strategy to work towards your financial goals.