How to Consolidate Debt in the Credit Crunch
If you are finding debts from credit cards, personal loans or store credit are getting hard to manage then you may want to consider debt consolidation. Debt consolidation involves the use of a debt consolidation loan or credit card balance transfer to bring all your debts into one place. There are a number of reasons to consider debt consolidation.
Easier to Manage: One of the main reasons is that having multiple credit cards or loans is difficult to manage. It’s hard to see your real financial position and with so many bills you can easily miss bill due dates leading to penalty charges and possible a reduction in your credit rating. By having just one credit card or loan you can see how much you owe, what interest you are paying and ensure you make all payments on time.
Lower Interest: Cutting your interest payments is another top reason for consolidating debt. You can do this by moving money owing on high interest credit cards onto a low interest balance transfer offer or debt consolidation loan with a low ongoing rate.
When choosing a product for debt consolidation you should keep the following in mind.
Highest Interest First: Make sure you consolidate and pay off the credit cards or loans with the highest interest rates first. If you can’t get a consolidation loan or transfer large enough to cover all your existing debts then make sure you consolidate the debts with the highest interest rates first.
Longer Term Offers: If you think you are going to need a fair amount of time to pay the debts off then make sure the consolidation offer will allow you to do this. For example, if you know your not going to pay off the debt quickly due to you budget then it may work out cheaper to choose a long term balance transfer offer with a low interest rate rather than choosing a zero interest short term offer. That zero percent offer may soon expire and your interest rate may skyrocket to a typical credit card rate. A card offering 3.99% for twenty four months may offer better value overall.
If your looking to consolidate your debts then you have the choice of using a credit card balance transfer offer or a stand alone consolidation loan. If most of your debts are credit card based then using a balance transfer may be the simplest option. If you are dealing with other debts such as auto loans and store credit then a debt consolidation loan may be a better option.
Don’t forget that consolidating debt does not pay it off. You are still going to have to make monthly repayments and the debt still exists. If you want to get out of the problem then you will probably need to make a few changes to stop the problem from happening again. Think about starting out by making a household budget and look for areas where you can cut back. By taking a well thought out approach to reducing your debts and outgoings you should be on track to reducing your financial concerns and living without bad debt.
It can be all too easy to end up in debt and especially during the current times of financial uncertainty you may find yourself unable to make repayments. Consolidating your debt can make your debts easier to manage and lower your interest charges meaning you become debt free faster.
Richard Greenwood is founder of the Click 4 Group who run a leading network of bank and finance comparison websites including click4credit.com.au which feature debt consolidation loans including the Citibank Personal Credit product.
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