Credit card debt. Just saying it makes most people nauseous, and that should not come as a surprise to any of you who are reading this as this type of financial obligation is something that most adults have encountered or will face somewhere down the road. Even though it is such a common issue, people are still trying to find solutions to pay off their credit card balances and enjoy a life of financial freedom once again. We are mainly going to focus on how you can consolidate your credit card debts, as it is probably the most efficient way of dealing with such financial problems. We are going to look at what financial methods there are for dealing with multiple outstanding credit card balances. But first, some thoughts to prepare for what is ahead.
- 1 Understanding the issue
- 2 What is the best way for consolidating credit card debt?
- 3 The best types of credit card debt consolidation
- 4 Consolidating debt on multiple credit cards with a debt management plan
Understanding the issue
Many people will say that they have so much experience with this type of financial obligation that there are no secrets to them. And yet, you would see many of these people still trying to figure out a way to get rid of their credit card financial obligations. That does not necessarily mean that these people do not have enough experience with such problems or that they lack the knowledge side of it. It may just mean that they were not able to use that knowledge in the best possible way. It is one thing to know what you have to do, it is another thing to actually do it.
What is the best way for consolidating credit card debt?
If somebody tells you that there is a perfect way for dealing with multiple credit card debts, that person may actually be right. But he may be right only for his specific financial situation. You see, the best way for consolidating multiple credit card bills is what is best suited for your specific financial situation. Whether that is a credit card balances transfer, a credit card debt management or a debt consolidation loan, it all depends on your unique financial situation. It depends on your credit score, the exact amount of financial obligations that you have, your other expenses, your sources of income and your capability of adjusting your lifestyle to the needs of the repayments process. Let’s now dive into the most used options for consolidating credit card debt so that you can get an understanding of how each type of credit card financial obligation consolidation works and how it can improve your financial life, and boost your chances of reaching the desired point of debt freedom.
The best types of credit card debt consolidation
As we have mentioned above, the specifics of your financial situation will ultimately dictate which type of credit card bills consolidation is going to be the best one for you. If you are not sure in your ability to make the best financial decision for your future, you may want to consider using the services of a financial specialist, so that you do not end up making the wrong decision. Let’s now explain how some of the best ways of consolidating debt on multiple credit cards work:
Credit card balance transfers
When we are talking about debt on a number of different credit cards, a credit card balance transfer is a method that often comes first to the minds of most of the financial experts out there.
How it works
With a credit card balance transfer, what you are going to do is to transfer the balances of your existing credit cards that you are trying to get rid of onto a brand new credit card. Normally, that new credit card should have a significantly lower interest rate which will ultimately allow you to repay your overall balances a lot faster and easier. It is very important to understand, however, that even though there are plenty of credit card consolidation companies that are offering 0% credit card balances transfers, that percentage of your new credit card is normally going to remain at 0% only for a limited time. After that, the interest rate will go up high. And so, when you are choosing a loan lending company to work with, and you are considering to transfer your credit card balances to a single 0% credit card, you should find out exactly how long is your 0% interest rate period going to last, and what will the interest rate on your new credit card be after that period expires.
Debt consolidation loan
Consolidating your credit card debt with a personal debt consolidation loan can give you many different benefits. Debt consolidation loans are probably the most popular way of consolidating multiple financial obligations, regardless of what the debt types are. This includes multiple credit card debts as well.
How it works
Consolidating your credit card financial obligations with a debt consolidation loans works similar to a credit card balance transfer. However, instead of transferring your credit card balances to a new credit card, you are shuffling them into a brand new debt consolidation loan. That loan comes with new terms, including lower interest rate and reduced overall monthly payment. In order to get access to these features, and mainly to be able to qualify for a lower interest rate credit card debt consolidation loan, you would normally need to have a perfect credit score or at least a good one. Having a bad credit score does not mean that you will not be able to qualify for a debt consolidation loan with better terms than the ones you currently have on your multiple credit cards. It is just going to make it a bit more difficult and you would have to spend a long time on researching different loan lending companies to find the one that can offer you exactly what you are looking for.
Consolidating debt on multiple credit cards with a debt management plan
Debt management plans are a preferred option for consolidating multiple debts for many financial experts. With debt management plans, you are still getting a single monthly payment for all of your financial obligations, however, you are not taking out a new loan, and you are also not transferring your credit card balances to a new credit card.
How do debt management plans work?
With a debt management plan, you are working with a debt management organization (preferably a non-profit debt management organization) and you are making a single payment to that debt management organization. After which that agency splits that money among all of your creditors. The job of a debt management organization is not only to divide your single payments among of all of your creditors but to negotiate some better terms for your financial obligations on your behalf. They mainly try and lower the interest rate on your balances, reduce your monthly payment, and if possible, reduce the overall debt amount that you need to repay.