How to Consolidate Credit Cards

When you find yourself struggling to make even the minimum payments on your credit cards, it is likely a red flag that you need to act quickly to prevent default at some point in the future. Consolidation of credit cards is a popular way to regain control of your credit card debts but there are several options for consolidating. Depending on your financial capabilities, at least one of the following debt consolidation options may work for you. Keep in mind there is no one-size-fits all solution to credit card consolidation so explore all options before making a commitment.

Do-It-Yourself

If you feel you are organized and ambition enough to conquer consolidation on your own, by all means take the necessary steps and save yourself some fees. If you own your own home, you may be able to take out a home equity loan to pay off credit card debts in full. You might even be able to get a tax deduction with a home equity loan consolidation. Be cautious of this method, as the collateral of the loan is your home and a default may result in the lose of your home. If your credit is otherwise good, you may be able to apply for a personal loan in the amount of your debt. Lenders are much more cautious about loan applications and you must have excellent credit and not already be in default on your credit cards to use this method for paying off debt. If a loan of any kind is not available to you, you might consider asking a family member to lend you money and set up a repayment contract that suits both parties.

If you feel you are capable of managing a credit card, you may want to consider applying for a low or no interest credit card and do a balance transfer of all credit cards to the new card. As long as your balances collectively do not exceed the credit limit on the new card, you may find that you can successfully manage to pay off the entire balance during the promotional period and save a lot of money on interest rates. However, if you don't make the payoff during the promotional period, you may end up owing more when the standard interest rate kicks in, usually 6-12 months. Also, balance transfers do come with fees so check out the terms of the new balance transfer card and make sure it aligns with your budget.

Another step often overlooked as a do-it-yourself method is the renegotiation of your credit card terms and balances with your creditor. Many creditors will be happy to work with you if they know you are having financial problems. They are in a position to negotiate in order to get money rather than risk you defaulting on your entire balance.

Third-Party Assistance

If you feel incapable of handling credit card debts on your own, you may wish to consult with a professional debt consolidation or debt settlement agency to assist you with your creditors. These debt programs are not for everyone but they can help some get back on track and become debt free in a shorter period of time than it would take to pay off the balance on your own.

Debt settlement involves a client paying a predetermined amount into an escrow account until a lump sum is accumulated that allows debt negotiators to settle your credit card debts for up to 60% of the original balance and use the funds to make a settlement. Debt consolidation companies allow specialists to work with you and your creditors to negotiate a monthly payment that is more reasonable and will satisfy all credit card debts enrolled in the program. Interest rates are typically lowered and finances charges usually cease once an agreement has been reached. The client continues to make monthly payments until debt is satisfied in full. Both programs do typically charge fees for services rendered but depending on your level of debt, they can alleviate debt faster than you could with minimum payments. These programs also help to end aggressive collection calls from creditors and debt collectors.

Regardless of which method you choose to deal with credit card debts, the crucial part of the process is being upfront with yourself about the warning signs of credit card debt and staying in touch with your creditors until you can resolve the problems. Choosing a method is an important first step and should not be taken lightly. Exploring your options and the different methods for dealing with credit card debt can help you settle your financial problems and avoid bankruptcy</body>
 

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