Could Credit Card Consolidation Help to Set You Free?
A Guide to Consolidating Credit Card Debt
This article is about credit card consolidation and how it can save you a fortune in interest and late payment charges.
Why Would You consider Consolidating Your Credit Card Debt?
Many people go about there daily lives, using their credit cards to pay for things, and then comfortably pay their credit card balance at the end of the month. These fortunate people rarely run into debt problems. Unfortunately for many people today, debt is a very common part of everyday life and very large problem to boot. Sadly, one of the easiest ways to fall into debt seems to be through the use of credit cards: for really unlucky people, credit card debt can be such an issue that it may seem that they will never escape from it.
Regardless of how big a hole your credit card has got you into, credit card consolidation might offer you a way to get out of it
Consolidating Your Credit Card Debt
There are two principal methods that you can employ to help you with your credit card debt:
- Credit Card Balance Transfers and
- Credit Card Consolidation Loans.
Consolidating Credit Card Debt Through Balance Transfers
One way to to consolidate credit card debt is to consider tranferring the balances of your credit cards to another card that has a lower interest rate. The intention here is to tackle the initial problem of credit card interest. If you can reduce your credit card interest payments, this can either give you more money to make a repayment against your debt at the end of the month, or it can at least cut you some slack.
However, you must do your homework as most credit card companies use the balance transfer mechanism to get you on board with a low introductory interest rate that increases after a given period. The trick is to use the introductory period for credit card consolidation at lower interest rates, so that you can pay off as much of your credit card debt as possible... though ideally you would pay it all.
Credit Card Consolidation Loans
A credit card consolidation loan is a specific type of loan designed to help you manage your credit card debt. Like balance transfers, consololidation loans offer you the chance to roll up your credit card debts and repayments into one lower cost repayment "plan". Many loans for credit card consolidation will often include a much lower interest rate then most credit cards. In many cases though, as with a debt or bad credit loan, a credit card consolidation loan will have a requirement that some form of collateral be used as security against the loan: this will often be your property or some other valuable asset. So long as you meet the repayments of your consolidation loan this will never be a problem: failure to meet the repayments though could result in you property being repossessed.
How Do Credit Card Consolidation Loans Work?
If you presently owe $10,000 to a number of credit cards and the combined interest on that amount is charged at 20%, your annual interest charge will be $2,000. Assuming you do not repay any of your balance for one year, your credit card debt would have risen from $10,000 to $12,000. If you find a credit card consolidation loan at say an 8% interest rate, your annual interest charge will be $800. This would save you a whopping $1,200 at a stroke. The real beauty here is that you could use that $1,200 saving to repay the consolidation loan off in a shorter period of time. In this way, credit card consolidation loans are often a much more attractive proposition than credit card balance transfers.
As with any debt, credit card debt can be crippling. The information above is really a general guide to a couple of strategies you can use to help you out of that type of debt, however if you have a large credit card debt that you cannot seem to do anything about you should talk to a professional financial planner who has specific expertise with credit cards and debt consolidation.
Credit Card Consolidation Summary
Although a poor credit rating can seriously affect your life, Credit Card Consolidation is a real possibility for most people. Although having a poor or bad credit history can be very difficult, don't despair as there are steps you can take to actively repair bad credit scores and reports. Although do it yourself Credit Card Consolidation may not set the world on fire, it could have at the very least have a positive effect.
Site Links for Credit & Consolidation Pages
Debt Consolidation Loans - Experian Credit Report - Credit Repair