In how many ways can you consolidate your credit card debts?
October 14, 2011 by Nancy Smith
Filed under Credit Report
Are you losing your financial freedom? Are you restrained because you have to control your spending in places where you need to spend? Are the multiple billing cycles every month making you lose your head? If the answers of the above questions are yes, then credit card consolidation maybe the best way out for you. For the majority number of people in this country, who are neck deep in credit card debts, consolidating credit cards is one of the most viable options to make their debt payback process easier and more feasible.
Why should you go for credit card consolidation?
The main principle behind credit card consolidation is merging your multiple credit card debts into a single one. You can do this by two methods, either by the balance transfer method or taking out a debt consolidation loan. Read on to know about both the methods in details.
1. Balance transfer method – In this method you can transfer your balances in the high interest credit cards to a single low interest credit card. Many credit card agencies offer you balance transfer cards. These cards have either very low interest rate such as 1% or 2% or they have 0% interest rate. However, this low interest rate offer is applicable for a specified amount of time. You can transfer all your balances in your high interest rate credit cards to this balance transfer card and pay them off. In this way you are getting the benefit of both consolidating your debt and getting a low interest rate which will help you to pay off your debts faster. However, you should take care that you pay off the debt within the introductory interest period offer, otherwise the rate of interest increases quite a lot after that.
2. Debt consolidation loans – You can also take out a debt consolidation loan for credit card consolidation. In this process you take out a larger loan at a lower rate of interest. Usually if this debt consolidation loan is a secured loan such as a second mortgage where you keep your house as collateral, your interest rate reduces drastically. This is because in a secured loan, you secure your loan against a property which guarantees that if you default on your loan, then the lender will get something back in return. You can use this debt consolidation loan to pay back all your smaller credit card debts. Now you have to gradually pay back this consolidation loan. Thus, in this process too, you are able to merge your multiple debts into a single one and get the benefit of lower interest rate.
The above two methods can thus aid you in credit card consolidation and paying off your debts.
- Contributed by DebtCC Community member. You can follow us on Twitter here: http://twitter.com/debtcc
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