Consolidate Credit Card Debt to Lower Your Monthly Payment
When one of the few more widely available credit card consolidation alternatives, debt management plans (DMPs) may be your best bet. DMPs don’t involve taking out another loan, like a home equity line of credit. And although you can save money by using a lower interest rate than you are currently paying on your cards, you won’t benefit if your accounts end up in collections or the credit agencies get any report of late payments or missed payments. Debt management plans (DMPs), also called credit counseling programs, consolidate your debts into one monthly payment. You make your payment directly to the company that is servicing your debt.
The reason consolidating your debts is less costly than other forms of credit card consolidation is that you are already paying interest on your accounts. The remaining amount is paid to the debt management company. This saves money on payments over time. As long as you make your payments on time, your credit score will improve. However, DMPs are not the best way to manage a lot of debt.
If you already have a lot of debt and are trying to consolidate credit card debt, you are probably hoping for a lower interest rate on your new loan. And some companies will try to take advantage of you by applying for a low introductory rate, then raising it once they’ve secured your loan. But that can also work against you. Some companies will offer an introductory rate for six months. Then, after you’ve made all your payments, they’ll raise it to a higher interest rate. So, as long as you can pay on time, you’ll be better off with a standard interest rate for your new loan.
Another option for credit card consolidation loan is a settlement of all your credit accounts. Some credit companies will settle your debts for a fraction of what you owe. Others, like Sallie Mae, will charge a fee for this service. They can do this because they have more at risk if you default. They have to recover more money, and they pass the savings they get on to you in the form of a higher interest rate.
Credit card consolidation loans are not always offered to individuals. Some companies will finance your consolidation into other low-interest accounts, like credit cards with lower rates of interest. You can also find deals that will allow you to transfer your balances from high-interest credit cards to consolidation accounts with lower rates of interest. Sometimes, all you need to do to consolidate your credit cards is to close them.
However, the best way to consolidate your credit cards is to apply for a single loan. In this case, you would be applying for a home equity loan, personal loan, or even a home equity line of credit. These loans will carry a much lower rate of interest, as compared to your current rates. The rate may even be lower than your existing rates. Because there is no collateral, you will be able to get a lower rate.
A lot of people choose credit card consolidation loans to lower their monthly outgoings. They can use the new loan to pay off their old ones and thus save a lot of money. By paying a lower monthly amount, you can free up some of your own money. You would then be able to pay off the new loan, which could take a couple of years. In fact, if you do a little bit of research, you will probably find a better interest rate than you would get if you close your old accounts. In fact, if you close your accounts but still continue to pay your balances on time, you will actually be increasing your debt, not decreasing it.
Once you have consolidated your credit card debt, try to take another smaller loan, preferably with an introductory period of at least twelve months, and pay it off as soon as you can. Then you can concentrate on paying off the new loan, and you will be well on your way to becoming debt free. You can then concentrate on saving up more money each month, to eventually get rid of your entire debt.