Do you find yourself under the huge burden of credit card debt? Is it giving you nightmares and you are finding it really hard to sleep peacefully at night? If these questions sound familiar, read on for more information on how to get rid of the credit card loan.
One of the viable means through which you would be able to get out of a credit card loan is, “debt consolidation.” However, before going through this or any other route get yourself familiarize with the fact of how dangerous a credit card loan could be! First, it works on compound interest, which means if you keep on paying the minimum balance you would be stuck in a loophole where the principal value of the loan would diminish gradually.
It is important for you to know and understand what debt consolidation is. Basically, through the debt consolidation, you would be able to combine all your outstanding debts and thus, you have to manage one account only. Instead of focusing on multiple loans, through debt consolidation you would be focusing on just one. John Pearce of The Debt Line explains.
- The interest rate on this account would be lower.
- You would be able to save some fees.
- You would be able to put more money into your principal considering the lower interest on this kind of debt.
- Money management would become easy for you.
- You can keep an eye on your credit rating as there would not be a hassle of managing too many accounts.
Process Involved In Debt Consolidation
Now that you are aware of what debt consolidation is, you must be willing to learn about the process involved in the debt consolidation.
A lender would give you the new loan. This lender could be a credit union, or it could be a bank as well depending on where you get the loan from.
The amount of this loan would be equivalent to your outstanding balance.
Usually, it is not secured by collateral. It is more like a personal loan that would enable you to pay off the outstanding balance.
You then have to pay off this new loan via monthly instalments or the agreed-upon terms of this loan.
Benefits of Debt Consolidation
You must think about what the benefits are involved in debt consolidation.
- You would be stress-free to some extent as now you don’t have to manage multiple accounts to pay off your loan.
- The interest rate would be lower here. However, you have to check.
- You would be able to manage your financial stability.
- You can avoid additional debt.
Disadvantages of Debt Consolidation
This is a common question that might occur in the mind of a person who is under too much debt.
- It would be difficult to get approval for debt consolidation.
- If you get a higher rate of interest than it would be better not to go ahead with this option.
- Get information on the hidden or relevant costs. Make sure this kind of loan does not get costly in the future.
- It is important that you get the loan from a reputable lender.
You have to manage your finance once you get the debt consolidation. If you again fall a victim to using the credit cards while you are still paying off this new loan, it would become a really tough situation for you.
Money management is really important to live a stress-free life. Debt or loan of any kind can put you in a lot of trouble especially when there is a high rate of interest associated with it. Make sure you are able to take yourself out of the difficult financial situation. It would be wise if you take advice from a wise friend or a great financial consultant!