Credit Card Debt Consolidation Made Easy
By: Sarah Dinkins
The interest rate charged by credit card providers is probably one of the
highest of the financial industry only surpassed by payday loans and cash
advance loans which have interest rates that are almost abusive. A credit
card can easily charge a 20% rate on an annual basis.
How does debt consolidation help?
Let’s say that your credit cards unpaid balances combined reach an
amount of $5000 and the average interest rate charged is 20%. You would then
be paying $1000 in interests each year unless you reduce the principal. If
you keep paying only the minimum payments on your credit cards you will only
be paying for 2% or 3% of the debt’s principal.
If instead of sticking to financing yourself with credit cards, you decide
to take a debt consolidation loan and use the money to cancel your credit
card’s balances, you can save thousands of dollars. A $5000 debt consolidation
loan can be easily obtained with a 10% interest rate. Let’s say you
want to repay your loan in two years, the amount of interests you’ll
have to pay over the whole life of the loan would be $1000 while credit card
financing would cost you $2000. By consolidating you’d be saving 50%
on interests in the worst scenario.
Other Options
As stated at the beginning of this article, there are other ways to reduce
credit card debt. If you don’t want to apply for a loan or if you can’t
do so because of your current credit score, there are some actions you can
take in order to improve your credit while at the same time reducing your
credit card debt.
Different Credit cards charge different interest rates, thus, it’s
a smart move to compare the interest rates before deciding. Once you’ve
identified the highest interest rate credit card, you need to focus on paying
off the balance of that card. In the meantime, you should pay only the minimums
on the remaining credit cards. Once the whole balance is paid, you should
continue with the next highest interest credit card and so on.
If you can get hold of a 0% Balance Transfer credit card with a 0% Interest
Rate promotional period, your can transfer the balances of your most expensive
credit cards into the new one in order to take advantage of the promotional
period to eliminate your debt. Your payments will go fully to reducing the
principal since there won’t be any interests.
In any case, once you’ve reduced your debt sufficiently and improved
your credit score, the smartest choice is to apply for a debt consolidation
loan in order to cancel your credit card debt and any other debt. If you
still can’t get approved for a consolidation loan consider contacting
a debt consolidation agency. Their expert negotiators will help you agree
with your creditor's new repayment programs and debt reductions so you can
get out of your debt problems.
Sarah Dinkins is an Expert Loan Consultant at http://www.badcreditfinancialexperts.com
where she helps people to repair their credit and to get approved for home
loans, unsecured personal loans, student loans, consolidation loans, car
loans and other types of loans and financial products.
If you need more useful articles find them at http://www.badcreditloanservices.com/article/
with professional advice on the financial field.
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