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Tuesday, February 23, 2016

How to consolidate credit card debt

By Andrew M.
If collection calls and past due notices have become a daily occurrence, it may be time to look into consolidating your debt. Debt consolidation for credit cards entails combining numerous balances into one monthly payment. Heavy balances, along with high interest rates, can cause your credit card debt to become overwhelming. A debt resolution program helps to relieve stress by simplifying the debt management process so that you have just one single monthly obligation. There are numerous ways to consolidate your credit card debt, including transferring balances to a single card, applying for a bank loan or working with a debt consolidation company.

Check credit reports

Before choosing a debt settlement plan, it is imperative that you check your credit reports and make sure they do not contain any incorrect information. Errors on your report can interfere with qualifying for debt consolidation assistance. Once a year, by law, you are entitled to obtain a free copy of your credit report from each of the three nationwide credit reporting agencies; Experian, Equifax, and TransUnion. Review the reports very carefully and circle anything that is incorrect, erroneous or incomplete. Write a dispute letter to each credit-reporting agency asking to have the inaccurate information corrected or deleted. Credit reports are updated every three months; keep an eye on your to make sure they are always accurate.  

Balance transfers

Transferring multiple credit card balances to a single card can help to simplify the management of your debt. Rather than having to pay off numerous cards every month, you will now only have one balance that requires a payment. However, balance transfers must be executed correctly, or you can end up actually increasing the level of your debt. The trick is to look for a new card that offers 0 percent or reduced APR on balance transfers for an extended period of time. Beware of the fine print; many credit cards offer 0 percent APR on balance transfers but new purchases made with the card will be charged the standard APR, which can be quite high. Some cards offer a reduced APR on balance transfers but only for a limited amount of time, such as 12 or 18 months. Make sure you can pay off your debt within that time frame or the finance charges will start to accumulate and add on to the amount that you already owe.

Bank loan

If your balances are too large to transfer to one credit card, then acquiring a bank loan may be a solution. The process for obtaining a bank loan can be long and tedious. A lot of paperwork must be filled out and personal loans, which are granted to individuals rather than companies or corporations, are often unsecured. This means that no collateral is required. Unsecured loans, or signature loans as they are often called, usually come with higher interest rates and shorter repayment terms than secured loans. Excellent credit and substantial proven income are often required to qualify for a unsecured loan.
The benefit of a bank loan is that you will be given one lump sum of money, which can be used to pay off your credit card debt all at once. The downside to bank loans is that they come with high interest rates, so you will be paying back more than you borrowed which is not necessarily a good idea either. Because of this, it is important to shop around for the best interest rates.

Debt consolidation

If you find your debt to be overwhelming or you just cannot get a handle on maintaining even the minimum balances on your cards, a debt consolidation company can remove the stress and help you to manage all of your accounts. The consolidation company negotiates lower interest rates and fees with the credit card companies, so that your payments can actually go toward your debt rather than be consumed by just the added fees.
You make one monthly payment to the debt company and that money is dispersed among your accounts until the balances are paid off. For the most part, debt consolidation programs shorten the time that it takes to pay off your credit card balances by half or more. However, most debt consolidation loans have the highest interest rates. This can put you at a worse position than you were before.

Debt negotiation may be your best option

Working with a debt negotiation company can be beneficial because they do all of the work for you. Should you incur a problem, a debt settlement counselor is there to help with options and support. Harassing and anxiety-causing debt collection phone calls may stop, allowing you to focus on your income and managing your expenses with some peace of mind. Many debt settlement companies provide online access to your account, so you can review the progress that is being made on your behalf. Debt negotiation companies may also offer financial advice and education on managing your finances, so that you do not find yourself in the same position again down the road.

If you look at all these options and still can't make the necessary monthly payments, one last option is debt negotiation. With debt negotiation, the amount you owe will be negotiated with your creditors and you may end up paying less than than the total debt amount.

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