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Is credit card balance weighing you down? You should try credit card consolidation for some relief. How does credit card consolidation work? You first need to decide if you want to enroll in a debt management plan, take out a new loan, or open a new credit card.
Whichever option you choose, you will use it to pay off several balances. After that, you will only have a single monthly payment: the credit card, personal loan, or debt management plan.
This will simplify your monthly payments and allow you to save money. The best credit card consolidation plan for you depends on your situation. These tips will come in handy when choosing a credit card consolidation strategy:
Check your credit card scores and reports
You should first check your credit card report for accuracy. If an error exists on your report, you might not qualify for debt consolidation. Therefore, whenever you find an error, you should dispute it.
Start by requesting your free annual credit card report from any of the three credit reporting agencies: Experian, TransUnion, or Equifax. You can also check your free credit report summary on Credit.com to understand what is inside your report. This site also offers two free credit scores that are updated every fortnight.
Once you find out where your credit stands, you have the necessary information to decide the best credit card consolidation plan for your needs.
Know your options
Make sure that you only look at the most reputable credit card consolidation companies. This means that you have to do your research properly. Some debt consolidation strategies will be more affordable than others and your choices could be limited by your current standing:
Consolidation credit cards
Do you have good credit? You should look for a credit card with a low rate of interest. You should also consider transferring high interest credit cards that have lower APR to save money on monthly charges as you repay your debts. Consumers with good credit have the option of choosing low-interest rate credit card and balance transfer offers.
Personal loans
Personal loans usually have simple interest unlike credit cards, which have variable rates and loan terms of about 3-5 years. When you consolidate your credit card debt into a personal loan, you will have a definite plan to pay off your debt. You can consolidate your debt with loans from your credit union or bank.
Before you apply, make sure that you ask about your lender’s credit requirements. Just remember that you will require excellent credit to qualify for the best interests on personal loans. Before applying for debt consolidation loans online, you should research your potential lender at the Better Business Bureau.
Be wary of lenders who promise to give you a loan no matter how bad your credit is. Moreover, you should avoid sites that charge a large upfront fee for debt consolidation loans.
Debt management
If you are making very slow progress in the repayment of your credit card debt, you have a serious debt problem. This means that you might have to get in touch with a credit card counseling firm to come up with a debt management plan. This plan allows you to make a single monthly fee to a credit card counseling agency and the company will then pay your respective lenders.
A lender can agree to lower your credit card balance interest rate when you agree to join a debt management plan. Debt management plans take 3-5 years.
Although credit card debt consolidation could save you money, it is not free. Make sure that the cost does not outweigh the potential benefit.