If you’re having trouble staying on top of your credit card bills, you’re far from alone. People are increasingly sliding out the plastic to pay for everyday items. Meanwhile, the Federal Reserve, with its rate hikes, has made debt more expensive and less manageable.
One way to tackle your debt load is through debt consolidation. Take a look at what it entails before you decide on this approach.
What is Debt Consolidation?
In the simplest terms, this is a financial strategy that rolls all your debts into a single fixed payment at a better rate. The solution streamlines your debts, making them more manageable and lowering your stress levels.
When you take out this type of loan, you use the funds to repay your high-interest credit card debt. The balances are then consolidated into a new, single loan with lower monthly payments thanks to a reduced interest rate.
A debt consolidation loan could help you:
· Extend your repayment term
· Save money with a lower interest rate
· Lower your monthly payments
These types of loans are unsecured, which means no collateral is needed to guarantee them. Your interest rate will be based on your credit score, income, and other financial information. It is usually higher than what you would pay for a secured loan since the lender takes on more risk if the loan isn’t backed by a high-ticket item.
To avoid further debt, it is essential to work with an experienced debt relief company like National Debt Relief. They can help you pay off your debt and shape better spending habits moving forward.
Would Debt Consolidation Work for Me?
You might be a good debt consolidation candidate if:
- Your paycheck doesn’t always cover your bills
- You have so many payments, you sometimes miss paying one
- You’ve put the brakes on spending, but your debt load persists
- You’re ready to embrace a long-term plan to pay off all credit card debt
Debt Consolidation Loan Options
Here are the top two ways to consolidate your debt:
Debt Consolidation Loan
A debt consolidation loan is often used to consolidate credit card debt. Your first step should be to outline how much you owe. Then list the various interest rates, lenders, and terms.
Explore your options to see what kinds of terms and rates you can get. While you may be able to lower your payment and/or rate, note that your repayment period may be lengthened, which could ultimately lead to paying more in interest.
The better your credit, the lower the rate you can get. If you can’t get an interest rate that’s under what you’re currently paying, you should probably take debt consolidation with bad credit off the table.
Credit card holders use a balance transfer to roll over their debt from an existing credit card account to another with a lower interest rate. This way, you can take advantage of a credit card’s introductory rate or $0 balance transfer offer. You could save a lot of money on interest but be sure to repay the full amount before the offer expires and rates skyrocket.
Debt Consolidation Drawbacks
Balance transfers come with certain costs and limitations. Generally, you have to pay a balance transfer fee — usually 3% to 5% of the total debt. And if your balance transfer card’s limit is low, you might not be able to move your full balance.
There’s always a chance that the debt could pile up again. And in some cases, you could end up shelling out more in interest than you would if you had you paid the cards off.
Having a lot of debt is stressful and can take over your life and steal your happiness. To avoid raising those balances even more, it is essential to work with an experienced debt relief company like National Debt Relief. They can help you pay off your debt and shape better spending habits moving forward. Can you imagine how good it would feel if you could start living debt free?