Consolidate Credit Card Debt

As most people know, managing your existing credit card debt seems pretty overwhelming. However, there’s usually one very effective option you might want to consider, which will ease both the emotional and financial burden of your credit cards – credit card debt consolidation. There is a number of ways you can consolidate your credit card debt, and there are quite a few benefits to doing so. Hopefully everything you should know will be covered here.

First of all, we better cover the basics. What does it mean to consolidate credit card debt? One way to consolidate is to take out a personal loan. You’ll use the money from this loan to pay off (completely, if possible) your current credit card balances. Another way to consolidate is to do a balance transfer. To do this you would need to apply for a new credit card that will allow you to transfer all the balances from your other cards onto the new card.

Opening an additional unsecured credit account is required for both of the above methods to consolidate credit card debt. So you might want to consider secured consolidation options – look into borrowing against your home equity. To do this you take out what is called a Home Equity Line of Credit (HELOC). A HELOC is a credit line that is “insured” by the equity in your home. You can take the proceeds of your HELOC (usually the proceeds are pretty substantial) to pay down your credit cards. And the other secured method of consolidating your credit card debt is to take advantage of your home equity appreciation by refinancing your existing mortgage. Again, you can use the funds made available to you from the refinance to pay off your current credit card debt. Refinancing like this is usually called a debt consolidation refinance – you are simply consolidating both your existing credit cards and your old mortgage into one new mortgage.

This is probably the most important and significant reason to consolidate credit card debt. When you open a new account, you absolutely must find an account that carries a lower interest rate than the rates on the credit cards that you’re currently paying off. It will therefore cost you much less over time as you pay off your debt. And if your credit score is high enough, you could even qualify for a 0% balance transfer. That means you won’t have to pay interest charges on your new consolidated balance for a pre-determined period of time. You also need to keep in mind that secured consolidation loans (those mentioned in the second paragraph above, e.g. HELOC, mortgage refinance, etc.) will usually have much lower interest rates than your current credit cards.

The second great and important benefit that comes from consolidating your credit card debt is the ease of having only one monthly bill, which will come from the new account that you just opened. When you have multiple credit cards you’re paying off, you’re also getting multiple bills each month, and they probably all have different payment due dates throughout the month. It’s not only difficult to keep track of, but it also increases the chance that you’ll miss a payment and end up paying late fees and in consequence have higher and higher interest rates. It’s a whole lot easier to receive just one bill each month, and you’ll be amazed at how much lower your stress level will be!

Not only will you save a good deal of money over the long run by lowering your interest rate, most likely you will also be offered a lower monthly payment minimum. Depending on your current financial situation, this may be a very attractive offer. However, even if you do receive a lower monthly payment minimum, don’t just pay that much. If you were able to maintain your monthly payment before you consolidated your credit card debt, continue paying that much even after consolidation. You’ll be able to pay off the new balance much more quickly than you would have with all your old credit cards.

These are just the main and most important reasons to get credit card help for consolidating your debt. As you look into it more, make sure you examine all of the financing options that are available before you decide which is the right one for you. You might be eligible for a credit card or loan with a very low interest rate compared to what you’re paying now.