Some people find it difficult and stressful to deal with too many credit cards bills in a month. Either they cannot or they do not want to. Sometimes these monthly paying bills routine seems boring and the things they need or want are not affordable for them anymore. In this situation, debt consolidation may be their solution. Simply you combine all debts into one single loan and pay off with lower interest rate. Your debt consolidation depends highly on your credit and savings.
Consolidating debt does not mean that you are debt free, instead you are taking another new loan to replace old ones and you are still responsible to pay it.
Before you start the process of debt consolidation, make a list of your credit cards, how much balance they got and how much credit card debt you owe? Write down names of your creditors, balance and interest rates.
Debt consolidation may not be the solution of every credit card consumer. There are few methods of consolidating credit card debt. But you need to understand if it will affect your credit score and which method suits you for consolidation of debt.
You can consolidate credit cards debt using these methods:
Personal loan; to pay off all credit card bills in one, you need finances. You can take a personal loan with low interest rate, to reduce the amount of loan, from banks or online lenders. Your credit score will decide the interest rate. If your credit score is poor, you tend to get high rates and in some cases origination fee, makes the personal loan more costly for you.
Read the fees, terms and conditions to understand how much it will benefit you, if you take this loan.
Balance transfer credit card; some credit cards are called balance transfer credit cards offer 0% interest rate on the balance you transfer, during introductory period. You can avail this introductory APR to save a lot of money on interest and pay off your loan during this time period.
Some credit cards have annual fee, also called credit fees. The cards charge annual fee, offer rewards, benefits and secured loans and costly for consumers.
Home equity loan or line of credit; in home equity loan or line of credit, a homeowner can get big amount loan, using their home as collateral. This is a secured loan and offers lower interest rates than personal loan and credit cards. But if you are unable to pay back loan, your home is at risk. You may lose your property.
Retirement account loan; you may be able to get loan from your retirement account. But you have to pay back within five years. There is no credit check, but you fail to pay back, will face penalties and taxes and you will lower your retirement savings.
Look at all terms, charges, APRs, interest rates, repayment conditions, installment amount and promotional period carefully and then decide what condition suit your needs.
You can always borrow money from a friend or family member to consolidate credit card bills. You can negotiate on low interest rates. There is no credit check. But you will be putting personal relationship at risk if you unable to pay back loan in future.