Credit Card Debt Consolidation to Get Out of the Financial Mess

Credit Card Debt Consolidation to Get Out of the Financial Mess

It is quite convenient for you to use credit cards while shopping. But once you start running up balances on several credit cards, you could easily get flabbergasted with the overpowering debt. However, there is no reason to panic yet. If you are thinking of getting rid of the overwhelming debt, you may opt for debt consolidation to pay off all your existing debts and get out of the financial mess and money woes. Here are some expert tips for consolidating your existing credit card debts.

Assess Your Credit Report & Examine Your Credit Scores

The first thing that you need to do is to assess your credit report meticulously and see if the entries are all accurate. If any errors are present on your credit report, you may not get an approval for debt consolidation. In this context, you must know that a free copy of your annual credit report could be obtained from the three top credit reporting agencies like Equifax, Experian, and TransUnion. Moreover, you could browse through your credit report summary for free on Credit.com. This could prove quite useful in understanding the contents of your credit report. You could also, obtain two of your credit scores for free. Once you have accurate and detailed information about where precisely your credit stands, it would be easier for you to determine which plan would be the right choice for consolidating your multiple credit card debts.

Get to Know All Your Debt Consolidation Options

There are three most commonly used debt consolidation options. They are a personal loan, balance transfer, and home equity.

Opt for a Personal Loan

If you require some time for paying off your debt, obtaining a personal loan could be the most effective way of consolidating credit card debt. When you roll all your existing credit card expenses into one larger debt consolidation loan, you generally get a lower interest rate. Your monthly repayments are often bound to be lower but beware they could be extending over a longer period of time. However, you need to remember that usually, longer loan terms would mean that you would be ending up paying more in terms of interest in the long run.

You may seek a personal loan for debt consolidation from a traditional financial institution like the bank or you may get in touch with an online lender or a credit union. You may contact renowned sites such as https://www.nationaldebtreliefprograms.com/, for perfect debt solutions.

Transfer your balance to a new card

As per https://www.huffpost.com, “If you are looking to only consolidate credit card debt, a balance transfer is a great option. Balance transfers are quite simple — all you have to do is request a balance transfer once you have signed up and been approved for a new card. The trick is to look for a card that offers 0 percent on balance transfers for an extended period of time or reduced APRs on balance transfers.”

You could effectively lower or eliminate the interest you are supposed to pay by strategically transferring your balance specifically from one or multiple cards having a high-interest rate to a lower-interest-rate card or a card with 0% interest rate. Several credit cards come up with wonderful promotional deals such as an introductory 0% APR on your balance transfer within a specific time frame. This could be a fantastic money saver provided you are successful in paying off all your debts before the expiry of the promotional rates. Do not forget that some cards may charge a fee for balance transfer. They would be charging roughly 2 percent to 3 percent of the total outstanding amount. You need to consider the fee while comparing with other debt consolidation options.

Use Home Equity

You could pay off all your credit cards in one go by tapping into your home equity. By using a loan or line of credit based on home equity you will be able to get a lowered interest rate and also significantly more flexibility in payment plans. This is a great idea for credit card debt consolidation especially if you have a good job or a steady income stream. That said using equity as collateral is risky because you will be putting your home on the line and it could be foreclosed if you default on your payments. This is a pretty big risk and one that you have to be sure about taking well before you commit to it.

Debt can sometimes become a state of mind if you are stuck in a rut for too long. If you consolidate and get rid of your credit card debt, you have to ensure that you don’t keep up the same practices that got you into the situation in the first place. You can use them responsibly, of course, and there are good benefits like travel miles and discounts but do not go overboard. Try to pay off all the balance you accrue every month so that you don’t end up having to pay interest. A good practice is to not keep your cards on you all the time so that you can’t use them even if you are tempted to. Another thing worth remembering is that closing the accounts once they are settled could look bad on a credit report so you should keep them open.

Conclusion: Do the Final Math

Consolidating credit card debts may mean saving some money, however, it does not come totally free at times. Credit cards could be having an associated balance transfer fee. You need to ensure that these fees are not too high to outweigh the potential advantage of obtaining a lower interest in precisely your debt. You need to keep in your mind that promotional interest rates would be expiring in 12 months. In such a situation be ready to pay off the debts promptly and within the given time frame. Moreover, a debt consolidation loan is often accompanied by origination fees. If you fail to repay your personal loan as per the agreed time frame, this may end up hurting or damaging your credit score so you need to pay off all your loan dues and keep working actively towards building a robust payment history.

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