There are two types of home equity loans: a fixed-rate, lump-sum option and a home equity line of credit, or HELOC , which acts like a credit card. Learn more about each option and which may be best for your situation. Before applying, ask about balance transfer limits and fees.
The wisdom of using saving or retirement accounts as debt consolidation options depends on your debt load and personal situation. You may be able to use the following types of accounts as debt options:. Debt consolidation is where you take your existing debts credit card, personal loan, car loan, or all of the above and consolidate them into a single loan, preferably with a lower interest rate.
Other options include rolling your debts into a new or existing personal loan, or credit card balance transfer. Depending on your situation, one approach could be to roll all your existing debts and any savings you might have into your home loan, if you have one. This could potentially help reduce your short-term debt burden, because:. Please note: this case study is based on a typical situation to show the benefits of an effective debt consolidation strategy. Speak to your bank or financial adviser about which type of debt consolidation strategy might suit your needs.
You can also seek free financial counselling by ringing the National Debt Helpline on All information on this website is subject to change without notice. You can qualify for a loan if you have bad or fair credit or below , but borrowers with higher scores will likely qualify for the lowest rates. Two additional ways to consolidate debt are taking out a home equity loan or k loan.
However, these two options involve risk — to your home or your retirement. In any case, the best option for you depends on your credit score and profile, as well as your debt-to-income ratio. Use the calculator below to see whether or not it makes sense for you to consolidate. Success with a consolidation strategy requires the following:.
Your cash flow consistently covers payments toward your debt. If you choose a consolidation loan, you can pay it off within 5 years. You always make your payments on time, so your credit is good.
For many people, consolidation reveals a light at the end of the tunnel. If you take a loan with a three-year term, you know it will be paid off in three years — assuming you make your payments on time and manage your spending. If you are thinking about consolidating your federal student loans into a federal Direct Consolidation loan , here are some questions to ask yourself:.
Loan consolidation can simplify your monthly payments by rolling multiple loans into one loan. After consolidating your loans, you will only have to make a payment to one student loan servicer.
This may make it easier to keep track of your student loans. Some older federal student loans have a variable interest rate. If you have a variable rate student loan, your interest rate can go up or down over time. Direct Consolidation Loans have a fixed interest rate, meaning your interest rate will not change over the life of the loan. The fixed interest rate for a Direct Consolidation Loan is the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest one-eighth of a percent.
A Direct Consolidation Loan could make you eligible for several repayment plans that may not be currently available to you.
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