Pennywise
Credit Card Debt Consolidation
by: Sahil | last updated: November 12, 2009
Category: Standard Credit Cards | Tags: Debt consolidation, consolidation, personal debt, credit card debt consolidation, debt
Category: Standard Credit Cards | Tags: Debt consolidation, consolidation, personal debt, credit card debt consolidation, debt
Many people find themselves in personal debt due to overspending or for other reasons because of credit cards. If you think that your debt is getting out of hand and is affecting your credit scores and credit ratings in an unfavorable manner then debt consolidation can be used in order to reduce the amount of interest that you pay on the credit cards. There are numerous ways to consolidate debts and some methods may even end up saving you money and increase your credit scores.
It is not difficult to consolidate a debt without taking professional help. The best method of doing this is going for a balance transfer to another credit card. Usually credit card companies offer balance transfers at a very low or zero percent rates for an introductory period. If you have more than two credit cards then it is possible to locate the one which is not in debt or is in better standing and has an offer for balance transfer. The combined balance of the rest of the credit cards can be transferred to this single one. In this way it becomes possible for a person to manage only one account successfully with a lower interest rate.
The interest rate on the card to which the balance is transferred is the most important factor. This is because even if the card has an annual fee or doesnt offer any additional benefits or perks, a lower interest rate makes a huge difference in the long run. Balance transfers can also be taken advantage of by taking out the remaining amount on the credit card and putting it in a bank for a period not exceeding the introductory zero interest rate period of the credit card.
One more way of consolidating a credit card debt is by taking out a loan and using the funds to pay off the owing balances. This is similar to transferring the balance to a single credit card since the consumer is only left with one monthly payment to take care of. Furthermore, once you pay off the credit card debt, some funds will be available for the consumer to pay off the loan and interest charges over a period of time. If you qualify for a low interest loan then this becomes a much more attractive option than balance transfers.
If you find that you are still not able to pay off the credit cards then seeking help from friends and relatives is not a bad idea. Especially in these troubled times when unemployment is on the rise and the world economy is suffering under the brunt of recession. A major advantage of paying off your debt by getting help from loved ones is that you may not have to pay any interest. This is also the fastest and the most efficient method since borrowing funds from relatives or friends will not affect your credit report in any way.
Debt consolidation is not recommended if you are converting an unsecured loan i.e.credit card balances into a secured loan. This can happen if you provide your home as collateral to a financial institution for the loan. This may turn out to be very risky since defaults in payments on the loan can lead to foreclosure making the situation even worse. The best way to avoid debt consolidation is to pay off the credit card balances in time and in full. This will ensure that you do not get sucked into more and more debt as you either take out loans or pay an ever increasing amount as interest on your credit cards.
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