You will enjoy lower interest rate if you consolidate your credit card debt. The goals of consolidating credit card debt are to lower the monthly debt payment and become debt-free faster. There are several choices in consolidating credit card debt:
Transfer to a Low Rate Credit Card
You can call your credit card issuers and ask them whether they can give a lower rate if you transfer the balances of other cards over to theirs. Try to negotiate for a fixed rate and ask them to waive any transfer fees if possible. If they agree, the same amount you pay each month will be more to principle and lesser to interest and thus eliminate your credit card debts faster. If you can’t get a lower rate from your current issuers, try to apply for a new low rate credit card.
You can shop online to get the lowest rate card possible. Don’t forget to check the fine print to make sure the rate last for a long period of time. Avoid too many applications for credit in short period of time because it can hurt your rating.
Here is a strategy of credit card transfer that can help you save more money in interest payment. You first apply for a new credit card with 0% introductory rate. The introductory period usually last for 6 months or 12 months. After getting the new card immediately transfer the balances of other cards to the new card. When the introductory period near the end, be prepared to make another transfer to a second new card that also offers 0% interest rate for the first 6 months or 12 months. You should submit your credit card applications a few weeks before your current introductory period expire.
Debt Consolidation Loan
A debt consolidation loan will turn multiple debts into a single loan often with lower monthly payment. You can apply for a debt consolidation loan from a bank or other financial institutions. It will be a lot easier to get a debt consolidation loan if you have assets or properties for use as collateral. A debt consolidation loan will eliminate all your existing debts immediately and allows you to make one lower monthly payment until you are out of debt. However you face the risk of losing your property if unable to maintain payment.
Credit Counseling Agency
Another option of credit card debt consolidation is ask a non-profit credit agency to help structure repayment plan with your creditors. After establishing a repayment plan, you’ll make one lower payment monthly to the counseling agency, which will pay all your creditors. Participating in a credit counseling agency generally will not affect your credit rating negatively and you should be able to get rid of all your debts in three to six years if you stick to the plan. But be careful which agency you work with, if the agency make late payment, you'll pay the price as you're still responsible to the creditors.
Published by Alan Liew on June 2, 2006 12:34 AM
