-
American families who had at least one credit card owed an average of $10,679 in 2008, according to CreditCards.com. When credit card bills become hard to handle, consolidating the debt is one possible solution.
Identification
Consolidating credit card debt means obtaining a loan to pay off your credit card balances.
Features
Consolidating credit cards involves borrowing a specific amount of money that you repay in a pre-determined number of equal payments over a period of years. In some cases, the bank or financial institution that grants the loan mails the payments directly to your credit card companies.
Types
Unsecured credit card consolidation installment loans are based upon your income and credit score and do not require you to pledge any personal property or collateral. Home equity credit card consolidation installment loans use the value of your home as collateral to the bank that you will repay the loan, and often has slightly less strict criteria than unsecured loans.
Benefits
The rates of consolidation loans are often lower than those offered by credit card companies, which saves you money as you repay your debt. In addition, consolidation loans typically allow you to repay your debt more quickly than you would be able to by making the minimum payments on your cards.
Cost
In addition to interest, some consolidation loans require you to pay fees when you sign your loan contract, such as an application or documentation fee. Home equity consolidation loans may require you to pay for an appraisal to verify that your home is worth enough to cover the amount you are borrowing.
Considerations
Consolidating credit card debt is only successful if you stop using your credit cards after you pay off their balances with your consolidation loan. To avoid this, consider closing all or some of your cards.
Source:
CreditCards.com: Credit card statistics, industry facts, debt statistics
Copyright 2023, Wired Ivy, LLC