When managing your existing credit cards seems overwhelming, one effective way to ease both the financial and emotional burden of the cards is to consider the option to consolidate credit card debt. There are several ways to consolidate credit card debt, and there are many benefits that arise from the choice to consolidate credit card debt.
First, what does it mean to consolidate credit card debt? One way to consolidate credit card debt is to take out a new personal loan and use the proceeds to pay down your existing credit cards. Another way to consolidate credit card debt is to perform a balance transfer; this involves applying for a new credit card which will allow you to transfer all the balances from your existing cards onto this one new card.
Both of these methods to consolidate credit card debt involve opening an additional unsecured credit account. Another alternative to consolidate credit card debt is to look into borrowing against your home equity. One way to do this is to take out a Home Equity Line of Credit (HELOC), which is credit line against the equity in your home. You would then use the proceeds of this to pay down all of your credit cards. Another way to take advantage of the equity appreciation in your home to consolidate credit card debt is to refinance your existing mortgage. As part of this refinance, you would use some of the proceeds to pay off your existing credit cards. This type of refinance is often called a debt consolidation refinance – you are consolidating both your old mortgage and your existing credit cards into one new mortgage.
Now that you understand how to consolidate credit card debt, it is important to understand the benefits of this strategy.
•Lower Interest Rate: Perhaps the most significant benefit that results when you consolidate credit card debt is that the new account that you are opening will carry a lower interest rate than the rates on the credit cards that you are paying off. This means that it will cost you less over time to pay off your debt. If your credit is strong enough, you may even qualify for a 0% balance transfer, which means that you will not have to pay interest charges on your debt for a set period of time. Moreover, a secured loan (e.g. mortgage refinance, HELOC, etc.) will generally have a lower interest rate than your existing credit cards.
•Faster Repayment Period: Along with saving money over the long term by lowering your interest rate, you will also more than likely be offered a lower monthly payment. This may be very attractive given your current financial situation. However, if you are able to maintain your present monthly payment amount after you consolidate credit card debt, you will be able to pay off the new balance much more quickly than you would have with the old credit cards.
•Ease of One Bill: Another very important benefit that comes with choosing to consolidate credit card debt is the simplicity of having one monthly bill that comes with the new account that you have opened. With multiple credit cards you are receiving multiple bills, more than likely with different payment due dates throughout the month. Not only is this difficult to keep track of, it also increases the likelihood that you will miss a payment and end up paying late fees and incurring higher interest rates. It is easy to see how one monthly bill can lower your stress level considerably!
These are just some of the many attractive reasons to consolidate credit card debt. Be sure to examine all of the financing options available to you before deciding on the right one. You may be eligible for a loan or credit card with very low interest rate relative to what you are paying.
How To Consolidate Credit Card Debt
Using credit cards to rack up a huge debt is doubtless the easiest thing anybody can do. It may be hard to comprehend that the majority of us feel easier handling credit cards than handling money.
Huge credit card debt has the effect of heavy and never-ending losses until the debt is got rid of, because interest charges on credit card debt are so much much higher than regular borrowing. One ends up losing more money paying interest than has been spent, not to mention the inevitable effect on credit rating when one neglects to meet up with the payments. These situations can actually be used to benefit you if you use a little determination and follow these suggestions:
Bearing in mind interest charges, transfer your balances to the lowest rate card where you could get a zero percent or much lower rate for a certain amount of time. During this period you can deal with all your other high interest rate debts. You should keep track of other deals with helpful balance transfers and get ready to start the process again when the original offer is nearing its end. In the event that one does not present itself, pay off as much as you can to reduce the debt. Because the finance industry is so competitive, you will always find zero percent offers available out there in the marketplace. Never forget though, the debt has not gone away.
Another extremely useful tool that you should find effective in reducing your burden of credit is a debt consolidation loan. These loans carry much lower rates of interest when viewed against credit cards. It's possible to get a debt consolidation loan at a lower rate and do away with all the debt. Just be certain that your repayments are always punctual so that your credit rating does not get even worse than it already is.
Another way of reducing credit card debt would be to employ some self discipline. Clearly this is easier to say than to achieve, but the only workable way out of your predicament is to destroy your credit cards, so that there is no temptation to spend unless you have the extra money to spare.
You can save yourself much trouble (and extra cost) when it comes to late payments so try to set up some kind of automatic payment, otherwise you may be tempted to put your credit card bill on a pile and get around to it when you have ?more time?. The big drawback with this method, before you know it a few weeks will have gone by and you've been stuck with a late payment. If you leave it until the deadline to send payment, you might find that it won't get there by the deadline. Never forget though it's not a deadline for sending the money, it's a deadline for the credit card company to receive it.
Paying late is a big mistake for a few reasons. You will definitely be charged a late payment fee and your late payment will go on your credit report for everyone to see. You may also find that you lose the beneficial rate you had and your debt will be automatically put onto the worst rate that the company offers.
If using the mail you should ensure you post your payment at least a week before the due date. If you've left it to the last minute, ring them up and try to make payment over the telephone.
Ever heard of the old saying: "closing the stable door after the horse has bolted!"? You may think that this article is that idiom personified. However, when it comes to credit card debt, I do believe that the saying should be modified to: "closing the stable door before any more horses bolt!"
Both Brad Stroh & Paula Edwinson are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Brad Stroh has sinced written about articles on various topics from Auto Insurance, Bad Credit Home and Finances. Brad Stroh is currently co-CEO of Freedom Financial Network and . If you would like more of Brad's. Brad Stroh's top article generates over 33100 views. to your Favourites.
Paula Edwinson has sinced written about articles on various topics from Credit Cards. Paula Edwinson is a finance counsellor. She runs the website on. Paula Edwinson's top article generates over 2400 views. to your Favourites.
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