Consumers regularly have multiple revolving debts. The rate of interest is high, there is no defined term and charges are regularly incurred for late/missed payments. A credit card debt consolidation loan involves borrowing a sum of money to pay off credit card debt and make a single debt repayment each month to one creditor. The rate of interest depends largely upon the borrower’s credit history. This will also determine whether the loan for consolidating credit card debt needs to be secured or unsecured.
Credit Card Debt Consolidation Loans – Lower Interest and Debt Repayments
The primary reason for consolidating credit card debt is to reduce the amount of money that goes towards servicing revolving debt each month. Whilst a homeowner with sufficient equity can take out a HELOC loan at an interest rate that is as low as 7%, charge card debt regularly accrues interest at well over 20%. Whilst making the minimum payment can reduce payments, this will only serve to extend the life of debt.
Consolidating Credit Card Debt – Get out of Debt with a Short Term Loan
Charge card debt hasn’t got a defined term and can continue indefinitely. It is important to pay off credit card debt in the shortest possible timeframe. Even at a low rate of interest, debt will quickly accrue. The longer the repayment term, the smaller percentage of each payment will go towards clearing the principal (amount owed). Whilst extending the borrowing period reduces monthly payments, this should only be performed when a borrower is struggling to achieve affordability.
Simplify Finances and Get out of Debt with a Credit Card Debt Consolidation Loan
Rather than making payments on multiple cards, make a single debt repayment each month. It is not only possible to pay off credit card debt, the borrower can also put unpaid medical bills, small loans and bills together. This not only simplifies family finances, it also means that the borrower is less likely to forget to make their payment so can avoid unnecessary charges and fees.
Credit Card Debt Consolidation Loan Alternatives – Debt Relief Programs for Adverse Credit
Someone who is struggling with debt repayments and poor credit is likely to find that consolidating credit card debt with a loan too expensive. The rate of interest could be similar to that already being paid on a charges card which would mean that the benefit is negligible. There are other ways to tackle unsecured debt, such as a Debt Management Plan or debt settlement program, when bad credit is an issue. Both of these work by reducing the principal and/or monthly debt repayments to an affordable level.