Simple Guide To Credit Card Debt Consolidation

Credit Card Debt

Debt consolidation may be the solution to your credit card debt problem if you owe money on multiple credit cards. It is hard to remember the due date for each of the different credit cards you owe money on. Debt consolidation solves this problem by combining all your credit card debts into a single bill payment. Besides, it can lighten your burden by reducing the interest rate to lesser than 10%.

The reduction in the interest rate will make a difference in the amount of time you take to repay your debt in full. You will find yourself taking a shorter time to repay the loan after the consolidation of your credit card debts. If you continue to make minimum payment, it is likely that your credit score will drop because your credit score will be affected everytime you make a late payment. The utilization ratio of your credit card can also affect your credit score. With debt consolidation, you will be able to increase your credit score and lower the credit utilization ratio as you continue to make on time payment. You will see an average increase of about 21 points if you have been steadily repaying the loan for at least 3 months.

In some debt consolidation programs, your existing credit card will show a zero balance and you will be able to charge it for purchases again. It presents a challenge for you to curb your temptation to use your credit cards to do shopping. The best way to pay off credit card debt is to completely make up your mind not to use the credit card again after you are accepted into the debt consolidation program. It is important to come up with a budget and allocate some money from your salary towards paying the credit card debt. In this way, you will always be able to have the funds to make the repayment on time. Failure to make on time repayment can result in increased interest rate or penalty charges on your consolidated debt loan.

Before you decide to consolidate your credit card debts, you should do an assessment on your current finance situation. You must make sure that you have enough money to pay for your basic living expenses after subtracting the bill for the debt payment. Debt consolidation can work only on unsecured debts for example credit cards and personal loans. You have to be sure that you have a steady job that provide enough income. You must be able to make repayment on the consolidated loan not just for a few months but a few years until it is completely paid off. The repayment amount is fixed and you will be paying the same amount month after month throughout the loan term.

There are lots of scam companies that use deceptive marketing languages to deceive people that they are offering debt consolidation programs when they are actually not. They will hold the money you send in to them instead of forwarding them to the credit card companies to pay your bills. Therefore, it is very important that you do research when looking for a debt consolidation company.