How To Sensibly Consolidate Credit Card Debt
Credit card debt can make you feel awful, particularly if its getting out of hand and you just dont know what to do about it
. However, if this is the situation which you are presently in dont lose hope, because there are debt relief strategies which will work for you. One very popular option is to consolidate credit card debt, which can help to reduce your debts fast. Also, it is not enough to consolidate credit card debt; rather it is equally vital that you consolidate your credit card debts in a sensible way.
What Happens When You Consolidate Credit Card Debt?
First off, lets start by considering the option to consolidate credit card debt. The two aspects of credit card debt which are creating problems in your life are the debt principle and the double digit interest rates. While a large principle is difficult enough to deal with, it is the double digit interest rates which increase the credit card debt repayments to such a degree that over time it becomes difficult to even manage to make the minimum monthly payments. When you consolidate credit card debt you manage to bring down this interest rate, which will help to give you your life back.
By way of example, if a credit card debtor owes $20,000 on their credit cards, and the average rate of interest work out at 18%, the total payment will work out at a total of $35,175 over 7 years (this is presuming minimum repayments only). Whereas if they can reduce this interest rate down to 12%, then the total amount will work out to be only $23,915, which is a saving of 31%.
So, there is no question about it, the option to consolidate credit card debt works, however, it is equally important to consolidate credit card debt in a sane way.
How to Consolidate Your Credit Card Debt
While credit card debt consolidation is a really good debt relief strategy, it is important to consolidate credit card debt in way which works for you. For instance, many of the apparent credit card debt consolidation methods, such as credit card debt consolidation loans, zero interest or low interest credit card balance transfers, and even additional credit cards, appear good; however, in the long run they actually end up costing you more money.
Why?
In the case of a credit card debt consolidation loan, it is a loan and has to be paid back. So if you default, then you will find your credit score suffers. Indeed because credit card debt consolidation loans give the impression that your debts are lower than they are, far too many debtors take out these loans only to go on accruing debts on their credit cards, store cards, overdrafts and so on. Because they rack up these debts, they find that quite quickly whatever relief they received under the consolidation loan quickly disappears, and now they have to pay back the loan and the new credit card debts too.
With zero balance, or low interest rate introductory offers, the offer ends quickly and is always replaced by a high interest one instead. Indeed some of them even have a retroactive interest increase so that even the initial deposit ends up been charged at a high rate of interest. Its just that they charge this interest after the low interest period is over (So it always pays to read the small print before you sign up to anything, especially a credit agreement.)
Here again, theses apparent consolidation tactics in reality turn out to be delaying tactics. Once the low interest period ends, reality settles back in and the debtor goes shopping for yet a new get out of debt quick card. However, pretty soon they have run out of credit options, and of course by this stage they possess extensive debts across a wide range of credit lines from credit card debts to consolidation loans to overdraft facilities and so on. Of course, once they reach the end of their credit they are left not knowing how to they are going to make ends meet.
Importantly, with all of these apparent debt consolidation tactics, the final result is that they only bring on more debt and drag out the repayment time frame.
While credit card debt consolidation is a really good debt relief solution, the only sane way to roll out a credit card consolidation plan is in such a way that it involves responsibility on your part, whereby you understand that the process and realize that you have to stop adding to your debts. For most debtors this option, to consolidate credit card debt, will involve signing up with a debt relief plan. However, for some debtors it will involve them negotiating directly with their creditors. Both credit card debt tactics are effective, as long as you take the time out to examine which of these credit card debt consolidation options is right option for you.
by: Brian Farrell
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