Credit Card Debt Consolidation Loan - Your Options!
The credit card has today become something one can't live with or without
. The thrill that "Plastic money" gives consumers is something you can understand only when you swipe that card. An average American has access to four credit cards at any given point in time and it is not uncommon for people to be caught in the vicious circle of a credit card debt.
The vicious circle happens like this. First you shop for something and swipe your card. You think that you have as much money as your credit card limit and you are tempted to buy more stuff. When you reach the limit on one credit card, the other one is always there to be used. This goes on till the beginning of the next month when the credit card bill finds its way to your home and the bill amount makes you literally jump out of your seat.
The interest on credit card balances is the highest compared to all other loans. Having any balance on your credit card payment is going to make you lose money really fast. And then there is the hassle of remembering and making multiple payments (for every credit card) every month.
So, a credit card debt consolidation loan is a great option to bail you out here. A credit card debt consolidation loan takes care of the entire outstanding amount on your credit cards and pays them off. You have to repay only this loan every month. However, it will make sense to get a consolidation loan only if the interest rate on the consolidated loan is lower than the aggregate interest on your current debts. Besides that, repayment terms and other terms should also be favorable. So, what are the options that you have?
The three common types of credit card consolidation loans are:
1. Zero/low APR balance transfer: Here, your outstanding balances on your current credit cards are transferred to a new credit. The interest rate on the new credit card is lower than the aggregate interest rate on your current credit cards. In fact, many would have a zero APR for an initial period (and that is a big relief). But do check the long term APR and other terms too.
2. Home equity loans: A home equity loan is a loan against the equity you hold on your home. The interest rates are very low since home equity loans are secured loans. So, the monthly installments and repayment period are favorable for you.
3. Other bank loans (including personal loans): Many banks offer several types of loans for debt consolidation and you can choose the one that suits your needs best. But you should check the interest rates and monthly installments; and see if the loan would make sense for you (will it ease the monthly payment amount and interest payments).
So, choose the credit card consolidation loan that is most suitable for your situation. You might even take professional advice (credit counseling) to get the best deal.
Credit Card Debt Consolidation Loan - Your Options!