Practical Tips On Consolidating Debt
Being able to work towards consolidating debt can be smart thinking. Credit card debt can be a scary thing. If you’ve got mountains of debt, multiple payments due per month and tens of thousands of dollars owed, it’s easy to feel like you’ll never get out from under it. Debt consolidation is one way to ease the pain of debt, though there are both benefits and risks to consolidating your credit card debt. It’s important to learn both the pros and cons of taking this route before you decide to explore it.
There are several ways to consolidate debt, but it’s crucial that you’re aware of what’s smart and what’s not when attempting to do so. Some methods of consolidation are financially sensible and relatively simple, while other methods could end up putting you in more debt in the long run than you were before.
One way of consolidating debt is by transferring balances to one single card. Balance transfer deals exist, and many credit card companies offer low introductory APRs for transferring balances. Some even offer zero percent APR, so it’s important to research what’s out there before making a decision. If you can find an APR that’s lower than what you’re paying on your cards, a balance transfer might be the route for you to take.
One benefit to transferring your balances to one card is that you only have to worry about one payment per month instead of several.
There are, however, things to consider when it comes to balance transfers. It’s important to keep in mind that there are often balance transfer fees that come along with such cards, and often times your APR increases after a predetermined amount of time. If you’re charged even a three percent fee for a balance transfer, the actual amount you’re paying in the long run increases greatly.
Always compare current balance transfer rates, as these can change with time.
Get A Loan
Another way to consolidate debt is to take out a debt consolidation loan that you can use to pay off your various debts. The ultimate goal is to pay a lower interest rate and combine your debt to one single payment. You can get a debt consolidation loan from a bank, credit union or online lender, but it’s important to look out for the best interest rates or else it ultimately defeats the purpose of consolidating.
Online lenders are a great option for those with lower credit scores. The lenders will calculate your risk and either approve or deny based on what your credit history shows. The lower your credit score is, though, the higher the interest rate will be — so make sure to take that into consideration if you go this route.
The Dos And Don’ts Of Debt Management
One way to consolidate debt that isn’t for everyone is implementing a debt management plan. This route is typically for people who don’t necessarily have significant debt, but rather are struggling with high interest rates. Debt management organizations work with creditors to negotiate new rates and eliminate penalties. The problem with debt management is that your credit cards will likely be closed during the period of repayment, so you won’t be able to access any credit. One good thing about this, however, is that it avoids the risk of piling on more debt and focuses solely on paying off what’s owed.
Regardless of what method you use to consolidate your credit card debt, always make sure that you qualify for debt consolidation and that it’s a smart, sensible option. If it seems like the right way to go, debt consolidation can be an excellent way to relieve yourself of the pressures of credit card debt in a timely manner while also helping your credit score.