Credit card debt is something that even the most money savvy have trouble with from time to time. It may seem as though the money and credit that you get for using credit cards is not in fact real money but this method of thinking can easily lead to ruin. There are a few different things that everyone should know about credit card debt consolidation before or during the process of getting debt under control. Credit card debt can be challenging and scary but it does not have to be debilitating.
The first factor to keep in mind is the interest rate on the loan that you take out to cover your credit card debt. The average interest rate on a credit card is about 15% each pay period for those that have under $100 worth of purchases on a credit card this rate is not all that difficult to manage for those with more this can be a crippling fee. The interest rate that you get on a line of credit depends wholly on your own personal credit score and with bad credit comes higher interest rates. These rates are generally comparable to the loan rates that any one can get from a lender.
Though these rates are comparable if you have a very low interest rate on one line of credit for instance it may be best to keep with that line of credit rather than switching to a loan credit line. Say for instance you have a phenomenal rate of 8% on a line of credit that extends to $5000 on this line of credit you have $2000 worth of purchases. It is going to be much more beneficial in the long run to keep this line of credit than it would be to transfer it to a loan that has a 13% interest rate just for the sake of having only one payment a month. Interest rates are a huge factor when it comes to deciding if a consolidation loan is right for you.
Another issue to consider is the number of credit lines that you have and what you are going to do with them once they are paid off. Now closing these lines is an option to prevent recharging the credit line but closing all accounts is not advised. It is best to keep one or two lines open to help steadily build up good credit. Closing all lines at once sends the wrong message and makes it difficult for borrowers to rebuild their credit scores in the long run. Keeping these issues in mind is the best way to help re-establish your credit after the lines have been paid off and you have secured your consolidation loan. Still another factor to consider is the monthly payment that you will be handling after the loan takes place.
Visit this page for more information.
If the loan payment is more than the credit card payments are on their own this loan is not for you and could lead to even further debilitated credit. Yes one monthly payment is handy and helpful for most but a payment that is more than the individual payments would have been is even harder to repay than smaller payments throughout the month. A larger payment is not a fair trade for one payment a month. Keeping this in mind is a great way to determine if a loan is right for you or if another loan may be a better option in the long run.
Keeping these issues in mind is the best way to insure that the credit card consolidation loan that you get is fair is going to help you rebuild your credit and is right for the amount of money that you can comfortably pay each month. Keeping these issues in mind is the best way to avoid high interest rate loans that will further ruin your credit and make borrowing in the future impossible.