The Truth About Minimum Payment Required For Credit Card Debt Consolidation
Choosing the right minimum payment for your credit card balance is an important part of balancing your finances. Most credit card companies offer the standard minimum payment, usually around 3%, in order to help you manage your finances. If you make this minimum payment, your balance will be paid off quicker and you will end up paying less interest or no interest at all.
Unfortunately, it’s easy to fall into the trap of making these minimum payments. The problem with the minimum payment is that it leaves you with a big balance. Once your balance has been reduced by this much, you may find that you aren’t able to pay all of the minimums anymore. So you end up taking out new loans or applying for more credit cards in order to catch up. You may even get in some trouble with your creditors if this continues.
If your credit card minimum payment amounts to more than you earn on a monthly basis, consider making some changes. If possible, reduce your credit card debt by negotiating with your creditors. You can do this yourself, by talking to your card company, or by seeking professional help. It may seem difficult to deal with your current lender, but remember that most people are able to lower their interest rates and eliminate annual fees, even if they owe more money than most card holders!
One way to decrease your minimum payment is to make partial payments. For example, if you have $500 in outstanding debt, and you only have to make a payment of $250 every two weeks, you’ll still only be required to make one minimum payment. This will help you pay down your debt quickly, while at the same time saving you money. However, remember to be sure that your remaining balances are paid in full each month, in order to keep from re-paying the debt to gain any additional discounts.
Remember that even if you can afford to make larger minimum payments, it’s best to keep your total payments below 40% of your balance each month. If you ever find yourself falling behind, you’ll find that it’s nearly impossible to catch up without incurring additional interest charges. So start making smaller payments to keep yourself above water. In addition, it’s best to use coupons and other discount opportunities when possible.
If you own a home, you may want to check into a loan modification that allows you to increase your minimum payments and reduce your interest rate. Unfortunately, banks rarely offer this type of program due to the risk of foreclosures and losses to investors. However, many homeowners are able to lower their mortgage costs through these programs, which allow them to make more affordable payments. It may not be easy to get approved, so you should always compare different programs before agreeing to a bank modified plan.
In most cases, you’ll be able to negotiate for a lower interest rate when you bring your minimum payments down, too. Most credit card companies will forgive a percentage point or less, and that’s something to consider when talking to credit card companies about lowering your minimum payments. However, they may not be willing to forgive a full percent, so keep that in mind.
One other option is to call your lender directly, as some will be willing to work with you. Often, you can make an even lower minimum payment and still get a lower interest rate. Just be aware that your lender has probably already approved a lower minimum payment and will likely charge you an increased interest rate once it becomes official. A little research goes a long way, so get some advice before deciding how to handle your minimum payment.