5 methods for consolidating credit card debt
One of the best reasons consumers consolidate credit card debt is to obtain better interest rates than the current rates they already have. Here are some of the best methods on how to consolidate your credit card debt in order to save you some serious money.
- The first and most popular method for consolidating credit card debt is through a debt consolidation or debt settlement program. These types of programs allow the consumer to consolidate all monthly obligations into one payment which is due each month. These programs work by contacting your creditors and getting you put on lower terms. These lower terms will consist of reduced minimum payments, reduced interest rates and of course, a reduced repayment plan. When some consumers may be stuck making minimum payments for tens of years, these programs are aimed at helping consumers get out of debt in a matter of 1-4 years on average. This first method is one of the most popular options consumers pursue as it actuallys help them get out of credit card debt as opposed to putting them further into it. Getting on these new terms cannot usually be obtained from the consumer directly and the use of these debt relief companies are vital for best results. The quotes we provide and after our financial success kit, will provide free access to a debt management or debt settlement program. According to fool.com
- The second method consumers use when consolidating credit card debt is through the use of a home equity loan. This is when a consumer approaches a bank with collateral (a home) and requests a debt consolidation loan. Now our company does not approve of getting these loans because consumers need to be made aware that your home will be served as collateral for these types of loans. So given you cannot make your payments on the loan, the creditors can and often will take your home. Although it may feel nice to have a large sum of cash given to you, the risks for these loans are extremely high and not advised.
- The third method consumers use to consolidate credit card debt is through the use of personal loans. Unlike the second method, this method is unsecured and usually a fairly good route to pursue when wanting to consolidate. Similar to the debt management program mentioned in paragraph one, this will allow the consumer to have one monthly payment as oppposed to several while the balances do get zeroed out. These loans are usually only attainable when the consumers has an extremely good credit score.
- The fourth method consumers opt for is through borrowing money from your life insurance or 401(k) plans. It's usually not well advised to move forward with these as they tend to have the highest penalties and risks involved when it comes to interest.
- The only other option we would recommend would be to liquidate an asset or try and borrow money from a family member. It's important that given you have friends or family members that can loan you the money, that you focus on repaying that person back immediately. Try to shred the credit cards to avoid owing money to the credit card companies and your family at the same time.
Either of these 5 methods will work wonders for you when trying to repay your debt. Try not to go at it alone and try to opt for method one whenever possible. Fool.com has some good tips for consumers wanting to repay the debt they owe without having to enroll into one of these methods.
5 tips to successfuly consolidate credit card debt
Here are five tips to following when considering consolidation offers:
Tip 1: Check interest rates before consolidating credit card debt onto one card or loan. You want to make sure you get the lowest interest rate possible. If you can get a new card or loan with a super low interest rate, or even a 0% APR introductory offer, you should take it.
Tip 2: Check your spending habits. If you are consolidating your bills, extravagant spending should be taken into consideration. Obviously, consumers who are in a hardship program should stop buying things they don't necessarily need. You need to stop spending and stop using your credit cards; otherwise the consolidation will profit you nothing in the end.
Tip 3: Consider all the options. You can consolidate to one credit card, enroll into a consumer credit counseling service, take out a home equity loan, or get a personal loan through your bank. There are also consolidation services that help you get your debt under control. Check all the options carefully and choose the one that will cost the least and get you out of debt the most quickly. It's never a good idea to dive into a program without taking the others into consideration.
Tip 4: Beware of consolidation scams. There are many scams out there that will claim they will help you consolidate or get rid of your debt, when in reality they are out to steal your identity or take your money and run. Make sure that the solution you choose is one you can trust.
Tip 5: Another popular tip to take into consideration is to do a search on google for the company you're taking into consideration. Many complaints can be found by merely typing in the consumers company name into a websearch. This tool would allow consumers to do proper research and find possible past complaints.
Advantages and Disadvantages of Consolidating Credit Card Debt
- Lower interest rates
- Easier to keep track with one creditor
- Less stress over stacks of bills
- Easier to have fewer missed or late payments
When you are consolidating credit card debt to obtain debt relief, you face many advantages. First, you are going to have lower interest rates no matter which way you consolidate your debt. Whether you consolidate onto one card that has the lowest interest rate or you consolidate to a loan or home equity line of credit that has a lower rate, you will benefit from this advantage. It is also much easier to keep track of only one creditor. When you have many credit cards and bills coming in, it can be difficult to even tell how much debt you have or who you owe it to. By enrolling into a credit card consolidation program, you only have one creditor to keep track of, and all your debt will be in one place.
Another advantage when you consolidate credit card debt is that you'll have one monthly payment regardless of how many creditors you have. The peace of mind knowing that you have one monthly payment as opposed to several will be a huge stress relief. By having one monthly payment through consolidating, the less changes you'll encounter late fees which in turn, will make your credit score go up.
- Some solutions may require you to surrender your credit cards
- Taking on new debt
- Change of lifestyle
In order to best serve you, many debt consolidation companies will require you to surrender your credit cards. This keeps you from incurring new debt while you are trying to get a handle on your current finances. While this is for your benefit, it can be devastating to change your lifestyle to fit your budget and stop using credit. This is especially true if you are used to using credit cards for necessities such as gas and groceries. You should carefully consider whether or not you can make these lifestyle changes before you agree to the plan for consolidating your debt. But remember, if you don't enroll because you don't want to give up your credit cards, you may want to reevaluate that situation, because living on your credit cards is never a good thing.
Aside from the fact that many consumers may not want to give up the credit cards, not many disadvantages exist. Consumers often consolidate credit card debt to get on new terms with the creditors. This helps the consumer get out from debt and avoids putting them further into it. Living without credit card debt can be hard at first, but is a safe and advisable way to live. It's never a good idea to live in debt.
Consolidating Credit Card Debt.
If you find this article helpful. Please show your appreciation by clicking the Google +1 button for our site.