Learn how to use a credit card debt consolidation loan to get your financial house in order. In the United States total credit card debt hovers around $800 billion dollars. That is a lot of MasterCard and Visa debt owed by your friends and neighbors. The average interest rate on a card is over 13 percent as well and rising. Thanks to the new bankruptcy laws banks can now charge interest rates of 25 percent, 30 percent, and more. There are many benefits to a consolidation loan.
Avoid default and bankruptcy concerns by taking positive action now. Balance transfers are convenient but not a long term solution. One card debt consolidation option for homeowners is a mortgage refinance.
Benefits of a Credit Card Consolidation
If you are a homeowner and choose to go with a secured loan your interest rates are generally lower.
Since credit card debt consolidation loans often carry lower interest rates, your monthly payments can be less as well. You will also only need to make one payment to a single creditor. Be aware that even though your monthly payment may be lower, the term of your loan is often longer.
Balance Transfers Are Not The Same As Debt Consolidation
Balance transfers are not a permanent solution. Sometimes a lower APR is just a temporary introductory rate. Often balance transfers are subject to fees which are either a percentage of the amount transferred or a specific dollar charge. Balance transfers are easy and convenient but just amount to moving your credit card debt around. You are still subject to late fees, high interest, and over the limit fees if you charge up the balance on your new card.
Homeowners Have Additional Options For Loans
If you are a homeowner one option is to refinance your first or second mortgage and use the extra cash to pay off your higher interest rate credit card balances. A first mortgage is usually refinanced at a lower interest rate than a second which is usually a home equity line of credit (HELOC) or a home equity loan. An important fact to consider is that this converts your unsecured credit card debt into secured debt. This allows for a lower interest rate that comes at a price. You will collateralize the new secured debt by your home in most cases.
Finding A Card Debt Consolidation Loan
A great way to find a credit card consolidation is to look online. Just type “credit card debt consolidation loan” into Google or your favorite search engine. Many of the consolidation loan providers will allow you to apply online for faster approval. If you are a homeowner looking for a mortgage refinance you can consider any of the major brokerages or contact your local mortgage broker too. Also check with friends or family for a recommendation, they may have already done the research for you.
With Good or Bad a Credit a Consolidation Loan is Not Without Risks
Taking out a credit card debt consolidation loan is not without risks. Investigate a debt consolidation company before you sign anything. Beware of extra or hidden fees. Check on the loan provider with the local Better Business Bureau. A good credit score usually means that you can qualify for the best interest rates available. Even if you have less than perfect or even bad credit, there may still be credit card debt consolidation loan options for you.
If you might have a problem with running up new credit card balances after consolidating, you may need to consider other options. Working with a debt advisor and setting up a debt management program might be an appropriate first step. Credit counseling is also offered by several agencies and is another debt consolidation option for you to consider.
Ultimately you need to change your spending habits. If you take out a loan and then run up high balances on you credit cards then you will be in a worse financial situation then when you started. Think about your financial goals and discipline level then decide if a credit card debt consolidation loan is right for you.