What is credit card debt consolidation?
Credit card debt consolidation is a program that allows you to consolidate all your multiple debts into one monthly payment. With debt consolidation, you can lower the interest rate and therefore reduce monthly payments. Thus, credit card debt consolidation helps you pay off your debt as soon as possible. This is the best way to wipeout debt without injuring your credit.
Ways to consolidate credit card debt
A primary way of consolidating credit card debt is to take out a loan at lower interest rate and merge all the debts into the loan. If you own a home, you may put it up as collateral in order to get a lower interest rate loan. This loan is also known as a home equity loan.
Another way of consolidating credit card debt is a balance transfer. Transfer the balance on your credit card to a new form of credit that offers zero or low-interest rate.
You may also apply for a personal loan or unsecured line of credit to consolidate and pay off the credit card debt.
Define your goals
A few important tips before considering debt consolidation
The difference between debt consolidation and debt management
There are many people who think that debt consolidation is the same as debt management and credit counseling. The fact is debt management and credit counseling involves debt consolidation through a company. When you hire the services of a credit counselor or a debt management company, they negotiate with creditors and reduce the interest rate on each account. Then they collect a fixed monthly payment from you and disburse it to creditors in order to pay off your existing credit card debt.
Conclusion
Debt consolidation is the most viable method to pay off the credit card debt. But before going for this option, you must consider some factors associated with it. If you take out a consolidation loan while putting up collateral, you must remember that you cannot afford to miss a monthly payment. If you default on loan repayment, you may lose your asset. So make sure to choose the debt consolidation option through giving it careful thought and analyzing your fiscal situation. (Photo credit: Colorful stack of credit cards via Shutterstock)
