Consolidating Credit Card Debt

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You believe that debt consolidation is a way to reduce your monthly payments. But which debt consolidation strategy is best? Good question. These are some strategies that can be used to credit card debt consolidation options.

What is debt consolidation, exactly?

This is basically when multiple high interest unsecured debts are combined into one monthly payments, hopefully at a lower rate than what you pay overall on your current bonds. In reality, the best way to approach this issue is to get a higher rate.

It is important to be able to pay only one bill per billing cycle, rather than multiple payments and due dates. You will need to consider factors like your credit score and debt load before deciding which consolidation strategy is right for you.

Home equity loan or credit line

If you’re a homeowner, the equity may be available to you to obtain a loan or credit line and to pay off your debts.

A line-of credit is similar to a variable interest credit card. Home equity loans typically have a drawdown period where you pay only interest. This typically occurs in the first 10 years. This means that your total principal and overall debt will be reduced if you pay more than the minimum.

You’ll receive a great rate of interest because your house is the collateral. This is the downside: if you default, your loan could be cancelled.

Consolidation loan

You can obtain such a loan (which is actually an unsecured personal loans) from a bank. Credit unions or online lenders are all options. The interest rate you seek should be lower than what you currently pay.

Credit unions are usually more generous in terms of eligibility when it is comes to credit card consolidating. If you have a good relationship to your bank, consider using them. Because you only need to have soft credit (which doesn’t affect your score), online lenders can help you determine what type of loan is right for you.

Your credit score is the key to getting a better rate.

Card to transfer balances

Credit card companies often offer promotional rates or introductory balance transfer cards that have 0% interest rates. This card can be used to transfer your high-interest credit cards debt. You will save money and get your debt paid off quicker. For these cards to work, you will need good credit. If you are unable to repay these transferred debts prior to the end your rate will go higher.

Debt management plan

Here you can consolidate multiple debts in one monthly payment at lower interest rates. This option is best for those who are struggling to pay off credit card debt and have low credit scores.

DMP programs don’t impact your credit score. A debt management plan might be right for someone whose debt exceeds 40% of their income and cannot be paid back within five years. These plans are often created in conjunction with certified credit counselors and your creditors.

This information will help you to consolidate credit card debt. Make sure you assess your situation before choosing the right approach.

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