What do you mean by credit card debt consolidation?
Many people who are struggling with debts want to know “what is credit card debt consolidation?” Credit card debt is most harmful among all other debts since it comes with a high interest rate that often put borrowers into a huge debt trap. You shouldn’t let your credit card bills spiral out of control and instead try to pay them off with credit card debt consolidation. This process rolls all your card payments into one easy monthly payment that you can afford to pay.
When it comes to credit card consolidation, you should always go after the most affordable rates and terms available in the market. Given below are two useful options that can be used to pay off your high-interest cards with just one manageable monthly payment:
Transferring your balances
This is considered as the best technique to pay off your cards. You can send a request for a balance transfer card to credit card issuers. These cards are often offered with cheap introductory rates and you can shift all your balances to this card and pay them without any difficulties.
The introductory rate is a teaser rate. This should be clearly understood that this rate is only available for a limited time. When the introductory period ends, this rate would return to the normal rate. You must take a sincere attempt to pay all the balances before the expiry of the introductory period.
Transferring your credit card balances might often attract transaction fees, which is certainly an extra cost for you. It is necessary to read the fine print to determine how much you need to pay on transaction fees. You must make regular payments on your balance transfer card because not making timely payments would cause your interest rate to skyrocket.
While transferring your balances, you must stop using your cards altogether so that you don’t rack up additional debt. If you’re unable to do this, the situation would worsen.
Home equity loans
If you own a home and there’s a lot of equity in it, then you can qualify for a home equity loan to pay off your card balances. Your home equity works as collateral or security against your loan. Interest rates for these loans are quite reasonable. The monthly loan payments are lower than your combined credit card payments.
Nevertheless, you must be careful while taking out such a loan as you have the chance of losing your home if you default on your payments. It is better that you don’t use your cards any more and close all the card accounts. This would ensure that you wouldn’t be prompted to use them once again.
Advantages of credit card debt consolidation
Given below are the benefits of consolidating your credit cards:
Elimination of disturbing collection calls
One manageable monthly payment
Lowering of interest rates
Bankruptcy prevention
Reduced monthly payments
Elimination of late fees and over limit fees
Independence from debt
Improved credit score
As soon as all the balances are paid off, you mustn’t get tempted to use that piece of plastic once more. If you use it, then you would once again fall into the debt trap.
