Many people are carrying credit card debt every single month and the problem is getting worse. In the United States alone more than half of the adult population has some level of credit card debt. So in this article we will show you how to consolidate credit card debt so that you can manage it more effectively.
We live in an instant gratification world and it is all too easy to see something that you like and pay for it using a credit card. Sometimes it doesn’t feel like you are spending because you are not parting with cold hard cash. But this has become an epidemic and in America the average credit card debt is more than $4,000.
When you get your credit card it all sounds great doesn’t it. Use it to buy stuff and then pay off what you owe each month. If you don’t feel like paying off the whole amount (or you are unable to do so) it is not a problem because you can just pay a minimum amount to keep your credit card company happy.
The credit card companies know that a lot of their users will only pay the minimum amount and leave a large balance outstanding. They will then charge interest on this outstanding debt and this can really get out of control if you let it. You can end up paying back far more than you borrowed.
How to consolidate credit card debt is all about getting on top of the situation and paying off the debt leaving you with a manageable loan or loans. Once you do this then you need to resist the temptation of using credit cards to pay for everything again or you will end up in an even worse position.
1. How to Consolidate Credit Card Debt with a Balance Transfer
These days you will find many credit card companies offering a credit card where you can transfer the balance from your existing card and then enjoy a 0% APR period of time where you can pay off the balance with no interest.
This sounds like a great deal right? Well it is only if you completely pay off the balance that you transferred within the specified 0% APR period. If you fail to do this then you will have to pay interest on the remaining balance.
Getting approval for a balance transfer credit card usually means that you have to have an excellent credit rating. You may also have to pay a balance transfer fee which can be around 3% of the balance that you transfer.
2. A Consolidation Loan for your Credit Card Debt
Do you want to know how to consolidate credit card debt easily? One of the easiest ways to do this is by obtaining a credit card consolidation loan. This is an unsecured loan which will pay off your entire credit card balance that you agree to pay back over a specified period of time. The interest rate is fixed and a lot lower than the credit card company charges.
If your credit rating is not perfect then a credit card consolidation loan is often easier to obtain than a new balance transfer credit card. Lenders will assess your credit rating and then offer you a rate of interest. If your credit score is low then expect a high interest rate on your loan.
Some lenders will charge an upfront fee for arranging the loan as well. Some lenders will offer loans up to $100,000 to pay off credit card debt. The major benefit here is that you end up with a manageable payment that you need to make each month.
3. How to Consolidate Credit Card Debt with Credit Counseling
In the United States there are non profit credit counseling organizations that can help you with debt management and even recommend or setup a plan for you. If you want to try this then go with NFCC (National Foundation for Credit Counseling) accredited organizations in your area.
What will normally happen with a debt management plan is that the credit counseling organization will ask you to make a single payment to them and then they will pay your creditors. The organization may be able to negotiate lower monthly payments or rates of interest for you.
Some credit counseling organizations will insist that you close any credit card accounts when you embark on a debt management program. This is not always good for your credit rating. Also be aware that there may be a small fee for the services of the credit counseling organization.
4. Get a Home Equity Loan
This is how to consolidate your credit card debt by using your home as collateral. You can obtain a home equity loan for the credit card debt amount as long as it falls within a certain percentage of the equity that you have in your home. The equity is the current value of your home less your current mortgage amount.
One of the advantages of a home equity loan for consolidating credit card debt is that you can often secure a lower rate of interest and a longer payment terms than you can with an unsecured consolidation loan. There will be fees to pay and you must always remember that if you default on the loan your home will be at risk.
Take Action Immediately
Now that you know how to consolidate credit card debt it is time for you to take action. Choose one of the methods above and take control of your debt. Only use a credit card if you have to once you have consolidated your debt, and make sure you pay the full amount off every time and do not leave an outstanding balance.