Credit cards do come in handy, however, they do carry a certain amount of risk. You have to focus on paying the bill in full each month and on time. Along with everything else in life, keeping track of credit card balances can be stressful. There are options to juggling multiple credit cards. There is credit card consolidation.
What is a Credit Card Consolidation?
Credit card consolidation is the process of combining existing debts into one new debt. This is an opportunity to get yourself out of a bad situation. The goal of the consolidation is to become debt-free in a quick and cost effective way. If you have multiple credit cards a consolidation will merge these into one account. This allows you to make one payment per month to one creditor, rather than multiple payments to multiple creditor. Another benefit to this is you only have one interest rate. If you play your cards right, this make paying your debt down cheaper and faster in the long run.
Credit Consolidation with a Loan
There are two ways to consolidate your debt. You can do a balance transfer or a loan. A balance transfer card will combine all your credit card balances into one new card. Depending on the lender this could come with a fee, usually this is a percentage of the transfer. Like most other credit cards, your score will come into play. If you have a good score this will be a viable option. Balance transfer cards typically have low introductory rates, sometimes even as low as 0%. However, these rates generally last for about 12 to 18 months.
Another option is consolidating your debt using a loan. With this all your debts are collected under a single payment. There are a few types of loans you can choose from, personal loans, home equity loans, or 401(k) loans. You can get a personal loan from a bank, credit union or an online lender. The interest rate will depend on your credit score. However, personal loans generally have low interest rates. Personal loans come in various sizes and term lengths. Home equity loans allow you to borrow against your home’s value. You can get a home equity loan if your home is worth more than what you owe. These typically carry a low interest rate and is like a second mortgage. Lastly there is a 401(k) loan. These should be considered a last resort option. Home equity loans borrow against your home’s value and a 401(k) loan borrows against your 401(k).