How to Consolidate Credit Card Debt

Are you deep in debt? You need not worry; many Americans are in the same boat. Debt consolidation refers to the merging of different unsecured debts such as payday loans, medical bills, and personal loans into a single payment. Instead of writing checks to multiple creditors, you only have to write to a single one.

Doing so will help you to avoid mistakes that result in penalties such as late payments. There are three types of debt consolidation: debt settlement, debt management plans, and debt consolidation loans. They offer long-term solutions that will get you out of debt.

What is the best way to consolidate debt?

Depending on how much you owe, there are several ways to consolidate debt. If you have a credit card debt under 30,000, you can transfer it to the 0-percent APR credit card. You should also consider getting a personal loan to repay your balances.

Moreover, you could refinance your mortgage or get a home equity line of credit. You can also consider borrowing against your retirement savings or life insurance policy. If you have a large debt, the best way to handle it without taking out another loan is by enrolling in a debt management plan. Whatever you do, make sure that you enroll in debt consolidation programs that are government approved.

Debt management plan

According to most financial experts, a debt management plan is the best way of consolidating your debt. When you choose this option, you will attend a credit counseling session that will help you to figure out how much you can put towards debt repayment each month. The best debt management plans are run by non-profit agencies, which will help you to get lower rates of interest from creditors.

How does it work? You will send one payment to the agency and it will split it amongst your creditors. This debt consolidation method might affect your score but at the end of it, you will be debt-free and improve your score.

Debt consolidation loans

This loan allows you to make a single payment to one lender instead of sending multiple payments to several creditors. The debt consolidation loan you choose should have a fixed rate of interest – which should be lower than the one you were paying – to reduce your monthly payments. Different types of debt consolidation loans include home equity loans, personal loans, and zero-interest balances on credit cards.

Such loans give you an easier way to track your finances by bundling your bills into one single payment. However, you might end up facing a longer repayment period.

What is bill consolidation?

This is an option for eliminating debts by combining all bills and paying them as a single loan. With this option, you only have to make one payment, which is a good idea for those who have multiple separate payments.

How to get a loan consolidation

Credit unions and banks are good places to enquire about loan consolidation. However, borrowing from online lenders might be better. Before deciding which method you should use, list all the debts that you want to consolidate: medical bills, phone service, and utilities. Moreover, you need to know your credit score.

When you have this info, you need to start comparing the lender’s rates, fees, and payment duration before you decide. A consolidation loan will lower your monthly payments and offer a feasible way to get rid of debt. You can consolidate credit card debt on your own by applying for a 0-percent APR credit card.

This introductory rate lasts for 6-18 months and paying during this period means lower monthly payments.