Credit cards and credit card debt is something that millions of people have to worry about daily. The average household carries little more than $15,000 in credit card debt alone. That is a lot to worry about and manage along with a mortgage, utilities, food and other daily expenses. Many of these households don’t know how to manage their essential bills and payments and get out of debt. With so much debt, there are many different options that credit card holders can choose from. One of the best options is to consider credit card consolidation.
Credit Card Consolidation: Definition and Benefits
Credit card consolidation happens when people decide to gather their outstanding credit card balances, apply for a loan and pay off their credit cards. This does several things for a family that is struggling under the weight of credit card debt.
Those that choose to use credit card consolidation to pay off their credit cards will see an immediate effect on their budget. With so many different payments and different payment amounts being due during the month, most people have a hard time staying on budget. With one loan payment, budgets are easier to manage. There is only one payment due and that payment is normally a fixed amount over a fixed length of time.
Not only will a loan give individuals a fixed amount to pay each month, it will also save money. People with credit card debt have interest constantly accumulating. Once the balances are paid in full, there is only one interest rate that is accumulating. Normally, the interest rate on a consolidation loan is lower than the interest rates on credit cards.
Credit Card Consolidation: How to Do It
Starting a credit card consolidation is easier than most people think. The first thing that needs to happen is for debt holders to get a clear idea of the exact balances that are owed on ALL their credit card. It makes no sense to leave one off and have to continue to make payments in addition to the credit card consolidation loan. Once the total credit card balance amounts have been added and decided, many people add an additional 10-20% on to that amount. This additional amount is normally used to help pay the bills that the credit cards are used for.
Once that goal loan amount has been set, it’s time to start looking for a consolidation loan. These loans can be found with banks, credit unions and other places. It’s best to start looking for a loan with a low interest rate and with a trusted and established company.
Once the loan has been secured and the credit cards balances have been paid, it’s best that the credit cards be put away. There are some people that complete the entire process just to add more debt back onto their credit cards. Many of those that do this hide their credit cards until their consolidation loan is paid in full. Credit card consolidation is an option that has helped many find their way back to financial health.