Heavy debt is one big issue with which many of the average US citizens struggle now. Being in charge of managing a family, there is a high chance that parents may often accumulate debts from their mortgages, childcare costs, credit cards, educational loans, and many unexpected events. All these may end up in a difficult living situation if not taken care of effectively.
When compared to singles, family people, and especially parents may struggle more with it. If there is a need for another emergency fund to meet unforeseen financial challenges, already being burdened with enormous lines of debt can put one into a difficult situation. Debt consolidation can be an effective solution to think of if you find your multiple debts are going out of control.
Debt consolidation is the process of combining various loans, which you used to pay back on a monthly basis, into a single payment. This approach will help you save a significant sum by effectively paying off the long-standing debts, and by being indebted to only one lender that offers a lesser interest rate. Moreover, the process becomes much easier with only a single payment to make, and as a businessperson or professional, you get more quality time for family and parenting.
While considering the debt consolidation options, it is vital to understand that debt consolidation will effectively work only as long as you maintain quality financial habits to avoid landing on any further debts. As discussed above, in case of parenting-related debts, these may be mostly personal loans to bring up children and educational loans, for which you can find easy way-outs over time if you don’t fall into more complicated debt troubles such as credit card payment or mortgage defaulting.
Various types of debts
Basically we can segregate the debts into two categories — secured and unsecured debts.
- Secured debts
The term Secured debts means that the money owed by you is tied to any of your property or possession of the same or a higher value. The term secured refers to the fact that if you fail to pay the debt, it may result in the property getting seized by the lender to compensate for the amount with interest you owe to them. Automobile loans and mortgages are examples of secured loans.
- Unsecured debts
In case of unsecured debts, there is no property attached to the loan, which are of more personal in nature. Credit card cash advance and students educational loans etc. are examples of unsecured loans. These loans may have higher interest rates since they have a higher risk attached to it.
Debt consolidation is possible for the above types of loans or in combination.
Credit card and remortgaging
There are various types of debt consolidating options ranging from availing a new credit card to remortgaging. Depending on the amount you owe and the number of debts you want to consolidate, the best plans to adopt may vary. When it comes to exploring an unsecured debt consolidation option, credit card is the most obvious choice. However, credit cards are notorious for attracting higher interest rates.
Personal loans are another option, which gives you the right opportunity to get access to enough money to pay off all credit card and mortgaging debts to make a single payment. You can read the reviews of top debt consolidation companies to see what people say about the effectiveness of various consolidation options.
When it comes to using credit cards for consolidation of your various parenting loans, there is also the option to transfer all balances into one single card. After paying it off genuinely, it will also help you to enhance your credit rating. Sometimes, upon making a good progress on paying off what you owe, during the introductory period, you may also enjoy the privilege of making interest-free payments.
Student or educational loans
For educational and student’s loan, there are different options put forward by different lenders. Generally, you can consolidate such loans through options like income-based repayment, re-financing, or combining into a personal loan etc. However, when you are into deeper debts, you need to understand your actual situation first and choose the best financial strategy to get out of it.
Single parent debts
This is another major area to be addressed as to what to do in terms of single parent debts. In fact, there are several debt relief options available for this category of parents, as initiated by different Federal agencies. If you are a single parent caught in multiple debts, then you should research option such as reducing the interest rate and getting additional time to repay. Below mentioned are some major debt relief avenues for single parents.
- Personal loans for debt consolidation
If there are multiple loans as a single parent, you can approach any of the credit counseling centers to get free assistance of a financial advisor to get a clear understanding of your current situation and way-outs. There are many government and non-government financial institutions offering personal loans to single parents, usually at a relaxed interest rate and longer repayment period.
- Considering home equity loans
Those who are not able to find out any unsecured personal loans at favorable interest rates can think of going for secured consolidation loans like home equity loan. However, when it comes to single parents, this has a serious downside also. With your house or property tied to it as collateral, failing on payments may cause you to even lose your home. Single parents should talk to a credit counselor before getting into a secured loan.
When it comes to the critical matters of parenting and debt consolidation, it is always advisable to enroll into any of the authentic debt management programs, where you can get ongoing support and useful advices. There are also many parenting loans made available by the private lenders. You can avail those only after a careful consideration of each and every aspect of it.
Robin James is a well-known finance writer with key areas covered as general economics, business, and real estate. You can read the reviews of top debt consolidation companies posted by James in the leading feedback sites and blogs.