Many financial credit card providers offer low or zero-interest balance transfer offers to entice you to consolidate your debt onto one credit card. What you need to know: Most balance transfers last only for a specified period of time, usually a month to three months. Then, the introductory interest rate on your new card can increase, adding to your monthly payment amount. This is when you need to decide whether or not you want to continue this introductory rate and consolidate your debt. You can also get longer-term interest rates through some companies.
Most people would rather pay off their debts in full rather than paying off the balance due plus the introductory interest rates. However, it is more difficult to do this if you have many loans and credit cards. If you are able to pay off one loan with a lower interest rate, you could save money each month. On the other hand, if you can’t manage multiple loans, you will end up paying more in interest charges. A better option may be to consolidate your debt by taking out one smaller loan with a fixed interest rate and a shorter term. By doing this, you’ll be in a better position of being able to make your monthly payments.
When considering credit cards to consolidate your debt, consider the impact on your credit score when you consolidate your debt. Because you are effectively adding debt to your current credit cards, your credit score will take a hit. However, if you don’t re-apply for credit, you should notice a small increase in your credit score within a few months. This is because your debts are all consolidated into one account and your credit score goes up. It may take a little while to notice the change, but after a while you’ll likely notice an improvement. In fact, after you apply for another debt consolidation loan, your credit score should begin to increase again as you are able to pay off your debts.
One benefit of consolidating your debts with a debt consolidation loan is that you’re paying off multiple credit cards and therefore only having to worry about one payment per month. This is helpful in many ways, since many people don’t want to remember to pay their multiple bills every single day. However, keep in mind that you may be transferring your debts to multiple accounts, which will mean that you will have to keep up with your payments until all of the debts are paid off.
Another advantage to using a debt consolidation loan is that you are able to save money each month when making your payments. When you have a lot of debts, it can be difficult to budget and make payments on time. With a consolidation loan, you can have the burden of making your payments on one account and have that account paid off much faster than it would take to pay each creditor individually. In addition, most creditors will agree to accept a settlement or a payment plan so that you can afford to make your monthly payments without the risk of going into default and damaging your credit history.
Consolidation loans are also useful if you find yourself juggling too many credit cards. With all the separate credit cards and balances that you are juggling, it’s easy to end up missing a payment or late payment and end up further damaging your credit. A credit card debt consolidation loan can help you avoid this situation as well as other common mistakes. For example, people often make the mistake of paying their balances on credit cards that have a low balance and then continue to charge on those cards, accruing more debt.
Another good option is to get a secured consolidation loan. If you own a home, you may qualify for an interest only or a fixed interest rate loan. Interest only loans tend to be a good option if you need the cash now and don’t care about the long term. These types of loans allow you to pay off your credit cards, reduce your monthly payments, but keep the interest level fairly low. Fixed interest rates tend to be better for those who want to pay off their debt in a longer period of time and pay lower monthly payments. It’s important that you shop around and get a good deal on a consolidation loan for your specific circumstances.
Consolidation loans are a great way to relieve stress and get out from under the overwhelming monthly payment and mounting credit cards bills you are facing. But as with any consolidation option, you do have to be careful. There are many companies who may not provide you with the services or interest rates that will work for your circumstances. Shop around and carefully choose a company who will provide the service that suits your particular needs.