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Consolidate Credit Card Debt

When managing your existing credit cards seems overwhelming, one effective way to ease both the financial and emotional burden of the cards is to consider the option to consolidate credit card debt. There are several ways to consolidate credit card debt, and there are many benefits that arise from the choice to consolidate credit card debt.

First, what does it mean to consolidate credit card debt? One way to consolidate credit card debt is to take out a new personal loan and use the proceeds to pay down your existing credit cards. Another way to consolidate credit card debt is to perform a balance transfer; this involves applying for a new credit card which will allow you to transfer all the balances from your existing cards onto this one new card.

Both of these methods to consolidate credit card debt involve opening an additional unsecured credit account. Another alternative to consolidate credit card debt is to look into borrowing against your home equity. One way to do this is to take out a Home Equity Line of Credit (HELOC), which is credit line against the equity in your home. You would then use the proceeds of this to pay down all of your credit cards. Another way to take advantage of the equity appreciation in your home to consolidate credit card debt is to refinance your existing mortgage. As part of this refinance, you would use some of the proceeds to pay off your existing credit cards. This type of refinance is often called a debt consolidation refinance you are consolidating both your old mortgage and your existing credit cards into one new mortgage.

Now that you understand how to consolidate credit card debt, it is important to understand the benefits of this strategy.

Lower Interest Rate: Perhaps the most significant benefit that results when you consolidate credit card debt is that the new account that you are opening will carry a lower interest rate than the rates on the credit cards that you are paying off. This means that it will cost you less over time to pay off your debt. If your credit is strong enough, you may even qualify for a 0% balance transfer, which means that you will not have to pay interest charges on your debt for a set period of time. Moreover, a secured loan (e.g. mortgage refinance, HELOC, etc.) will generally have a lower interest rate than your existing credit cards.

Faster Repayment Period: Along with saving money over the long term by lowering your interest rate, you will also more than likely be offered a lower monthly payment. This may be very attractive given your current financial situation. However, if you are able to maintain your present monthly payment amount after you consolidate credit card debt, you will be able to pay off the new balance much more quickly than you would have with the old credit cards.

Ease of One Bill: Another very important benefit that comes with choosing to consolidate credit card debt is the simplicity of having one monthly bill that comes with the new account that you have opened. With multiple credit cards you are receiving multiple bills, more than likely with different payment due dates throughout the month. Not only is this difficult to keep track of, it also increases the likelihood that you will miss a payment and end up paying late fees and incurring higher interest rates. It is easy to see how one monthly bill can lower your stress level considerably!

These are just some of the many attractive reasons to consolidate credit card debt. Be sure to examine all of the financing options available to you before deciding on the right one. You may be eligible for a loan or credit card with very low interest rate relative to what you are paying.

Credit Card Debt Help – 3 Tips To Reducing Debt

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While getting out of debt may seem impossible, there are numerous solutions available that will help consumers become debt free. Individuals who have acquired an enormous amount of debt may consider bankruptcy as their only alternative. However, this maneuver to alleviate debt is extremely damaging to your credit score. Before filing bankruptcy, consider the following tips to help you reduce credit card debt.

Apply for a Low Interest Balance Transfer

Many financial experts advise consumers to pay more than the monthly minimum on credit cards. In theory, this plan will reduce your debt. On the flip side, many consumers are unable to pay double their monthly minimums. The best method for reducing debt is lowering interest rates. A low rate credit card equals low finance chargers, which means a larger portion of your payment is applied to the principal.

If you have good credit, you may be able to negotiate a lower interest rate on your current credit cards. Furthermore, applying for a low interest balance transfer will help eliminate your debt. Some credit cards offer an introductory low interest rate for a specified period. In some cases, you may pay zero interest for the first six months.

Take Advantage of Home Equity Loans and Mortgage Refinancing

If you own a home, you may be able to reduce and eliminate debt by obtaining a home equity debt consolidation loan or cash-out refinancing. With a home equity loan, your residence secures the loan. These loans are perfect for good and bad credit individuals. Because home equity loans have shorter terms and lower rates, you can reduce your debt in five to ten years.

Mortgage refinancing is another option for reducing debt. Refinancing creates a new mortgage, thus homeowners must be in a position to pay closing costs and other fees. A cash-out refinancing involves refinancing your current mortgage, and borrowing your home’s equity. The cash received at closing can be used for a variety of purposes such as debt consolidation, unpaid utility and medical bills, and other huge expenses.

Using Online Debt Management and Consolidation Services

Non-homeowners and bad credit individuals may be unable to transfer current credit card balances or obtain funds from a home equity loan or refinancing. In this case, online debt management and consolidation services can help. Debt management counselors will contact your creditors and negotiate lower interest rates. Moreover, the agency will consolidate your debts and freeze your credit accounts. This way, you avoid accumulating additional debt. On average, debt management agencies can reduce your monthly payments up to 60%, and help you become debt free within a few years.

Consolidate Credit Card Debt – Best Way To Reduce Debts

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There is no quick way to reduce credit card debts. Nonetheless, those who outline a realistic strategy for reducing debts, and stick to this plan, will gradually reduce their credit card balances.

Consumers have several options for paying off credit card debts. However, this does not involve the balance miraculously disappearing. In most cases, consumers simply move the money and pay the debt in other ways. Here are a few tips on ways to consolidate debts and payoff credit card balances.

Refinance Home Mortgage Loan

With low mortgage rates, now is the best time to refinance a high interest rate mortgage. A refinancing affords the perfect opportunity for homeowners to lock in a fixed rate. In addition, homeowners have the option of borrowing from their equity and using the money to payoff consumer debts.

Cash-out refinancing will increase the total mortgage balance. If borrowing $15,000 from the home’s equity, this amount is wrapped into the new mortgage. Thus, if the old mortgage principle was $130,000, the new mortgage principle will increase to $145,000.

Debt Consolidation Personal Loan

Deb consolidation loans are an effective way to reduce and eliminate debts. Although this strategy simply moves the debt to another lender, debt consolidations have several advantages.

For starters, the interest rate on debt consolidation loans is significantly lower than most credit cards. With a lower rate, consumers have lower monthly payments. Furthermore, a larger percentage of the monthly payment is applied to the principle balance.

Many lending institutions offer debt consolidation loans. In most cases, collateral is required. If your credit rating is very high, a lender may approve an unsecured debt consolidation loan. However, be prepared to pay a higher interest rate.

Secured debt consolidation loans offer the best rates and terms. Different types of secured debt consolidation loans include loans protected by a vehicle title or a home equity loan.

Consolidate Debts with a Balance Transfer

If you have three credit cards with extremely high rates, consider combining all three balances onto one credit card. Many balance transfer credit cards offer zero percent interest for a specific length of time. If you are serious about reducing your debt, apply for a balance transfer and take advantage of the low introductory rate. However, avoid late or skipped payments. These will likely cancel the zero percent interest period, in which the lender may charge a much higher rate.