Consolidating credit card debt
If you’ve got a number of credit cards debts with different lenders, then an option you might want to consider is called credit card consolidation. Doing this means that you merge all of the debts you’ve got into one debt, giving you one, larger debt instead of several smaller ones. This can be done by taking out a debt consolidation loan or transferring all of your balances onto a low interest credit card.
What is a debt consolidation loan?
If you take out a debt consolidation loan, you use the loan to pay off all of your credit card providers, meaning that you’ll have paid off all your existing credit card debt. You’ll then work to pay off the loan in order to get yourself completely debt-free.
Opting for a debt consolidation loan means that you’re trading one type of debt for another – the benefit of doing this is that debt consolidation loans may have better interest rates than those of multiple credit cards. This allows you to save money on interest payments, and many people find it easier to manage one debt consolidation loan rather than several credit card debts.
Of course, you should always check the terms and conditions of any debt consolidation loan first. Make sure it’s financially preferable to how you were previously paying off your credit cards, and that any interest on the loan is lower than that of your cards.
Consolidating credit card debt through balance transfers
Another way to consolidate credit card debt is through a balance transfer.
This way, you’ll transfer all of your credit card debt onto a card with lower interest rates, meaning that you’ll pay less interest on your balance. Be careful, because these cards usually have a timeframe after which the low interest offer will have expired, so you’ll need to fully repay all the credit card debt within this timeframe.
Not doing this means you might have to pay more in interest after the offer expires, so be sure to check the terms and conditions of the card before you agree to the balance transfer.
Alternatives to credit card debt consolidation
Consolidating credit card debt isn’t the only option if you’re struggling with multiple credit card debts. Debt solutions can allow you to pay off what you owe in a more manageable, affordable manner, making your situation less stressful too.
Debt Management Plan
A free debt management plan allows you to reduce your monthly payment and pay your debts off over a longer period of time. You’ll make your payments to the debt management company you entered into the plan with; they will then distribute the money fairly between your creditors.
Individual Voluntary Arrangement
In an Individual Voluntary Arrangement (IVA) you make a single monthly payment towards all of your debts, the same as you would do in a Debt Management Plan. The difference is that an IVA is a legal contract, and if you break it by missing payments, your creditors could try to make you bankrupt. Having said this, in an IVA you could write off a large amount of what you owe once the IVA has finished.