Credit card payments can put a crimp in the budget of even the most financially secure consumer. What is the answer to this dilemma? A loan to consolidate those payments may be the answer an individual seeks, but the individual must choose the best way to accomplish that goal.
Those who are interested in credit card consolidation need to first research the options available to them. While the first thing that comes to mind is a consolidation loan, this may not be the best choice for every consumer. Research is the key to discovering which choice is the most beneficial. The options that are available for credit card consolidation include:
Before making any decision research and evaluation are essential. This means researching financial institutions, credit card companies and any other options that may be available. Making the right choice involves some research and in depth evaluation of a consumer’s current financial situation.
Do not be in a big rush to make a decision; allow time to perform due diligence and have all the facts and figures that are relative to the consumer’s individual circumstances. This means researching not just individual finances but also the background and financial well-being of the credit card companies, banks and credit unions with which an individual may choose to conduct business.
Those who are interested in consolidating credit card debt might first consider applying for a consolidation loan. Whether this is the best solution depends on the individual consumer; it is not the right answer for everyone. There are several questions to answer before making a final decision.
* Will a loan save on monthly payments?
* Is the interest rate on a loan lower than the credit cards?
* Does the borrower qualify for a consolidation loan without collateral?
* Is there a prepayment penalty if the borrower pays the loan off early?
* Is the transfer fee on credit card balances low enough to make it financial feasible?
* Will the introductory interest rate continue if the cardholder makes new purchases before the original balance is paid in full?
All of the above are important factors to consider when deciding which option offers the best answer to a borrower’s financial needs. The right choice is the one that allows an individual to use credit card consolidation to pay off the debt in a timely manner.
Benefits of consolidation loans include:
* Low interest rate
* Potential to raise credit score
* One monthly payment
* Extended repayment term
Benefits of balance transfers:
* Builds credit with a lower interest card
* Fluctuating payments based on outstanding balance
* Often have variable interest rates
* Can make payments in any amount to reduce the balance
Another way to get rid of credit card debt is to redesign the family budget in order to make payments that will eliminate the debt. One of the best ways to accomplish this goal is to work on one card at a time. Add some extra each month and when you pay off that card, add the money to another card and continue the process until all cards are paid in full. It’s important during this period to avoid using the cards except in extreme emergencies. It will be impossible to pay off the credit cards unless the consumer refrains from adding additional charges. Increasing the balance will defeat the entire purpose of budgeting for repayment.
The key to paying off the balance on any credit card is first and foremost to discontinue using it. It doesn’t help to pay $100 a month and then add the same amount with additional purchases. There are times when it cannot be avoided, but this is something else you have to define in the new budget: what things are essential and which ones can wait until the cash is available.
Related articles across the web