First things first; credit card debt in the U.S is now spiraling out of control. According to a recent American Household credit Card Debt study, the average household has $134,643 in total debt. The average household credit card debt is at $16,748, a figure that is bound to increase. The average American carries $3,600 in credit card debt according to data from the U.S. Census Bureau and the Federal Reserve.
This means most families and business enterprises are struggling with spiraling debt and the situation is slowly getting out of hand. Well, if you are handling multiple credit card bills, you appreciate how frustrating this can be. In most cases, consumers end up in default because they are not able to monitor all these debts.
This makes a bad situation worse. In addition to your ballooning debts, you will have to contend with a poor credit score. This means accessing most financial services will be impossible or you will have to pay a higher interest rate. All these factors lead to further financial turmoil in your life.
Consider that credit card debt on average costs $1,300 in interest annually and you start appreciating why thousands of families are slowly being dragged into poverty due to mounting credit card debts.
Credit Card Debt Consolidations as a Godsend
One of the most recommendable solutions to getting out of debt faster is through debt consolidation. Before seeking out this financial solution, it is important to get the actual debt consolidation meaning because many similar services are available online. This is one reason why many consumers are making complaints to the BBB regarding unscrupulous debt consultation programs which end up costing more.
Below are some highlights on debt consolidation that will help you make an informed choice:
1. Debt Consolidation in Brief
Paying multiple credit card debts is a frustrating and arduous task. Instead, you can bundle all these loans into one debt which is easier to repay. This is where debt consolidation loans come in handy.
Debt consolidation entails repaying all your smaller debts using a new loan. The new loan has its own terms and you will only have to worry about this single payment every month as opposed to myriad payments which can be overwhelming. It is important to note that no negotiations are involved between you and the creditors as you effectively settle the owed amounts.
2. Effective Debt Consolidation Works
If you have been in the market searching for debt consolidation loans, you must have come across a wide variety of products. While most of these will be passed off as debt consolidation, they are actually debt settlement programs and you will come to realize this too late.
A good consolidation loan should have the following features:
- Lower interest rates – The idea of loan consolidation can only work if the new loan comes with a lower interest rate as this will guarantee that you benefit from the new loan. Take time to check the actual APR of the new loan and compare it with the different loans you are servicing.
- A chance to boost credit score –Talk to your loan provider to determine the impact of the loan on your credit score. Unlike debt settlement, debt consolidation improves your credit score as you will be able to settle pending credit card debts. This information goes to the credit bureaus as fully repaid bills and you will earn more points in your credit score.
- Easier repayment – Once you have consolidated your credit card debts, it becomes easier to pay up and manage your finances. You will not have the pressure of multiple bills hanging over your head. This means that debt consolidation is an easy way to get your finances back on track.
3. How to Easily Consolidate Credit Card Debt
If you are struggling with ballooning credit card debts, it is time to consider debt consolidation. Once you consolidate, you have the advantage of paying lower interest rates on your single payment which is the dream of every consumer.
The following loan consolidation options will come in handy if you are looking for a way out of your ballooning credit card debts:
- Credit card balance transfer – This is one of the most igneous options of getting out of credit card debt. Most credit card companies have introductory rates for new cards in the market and you can use these to ease your debt burden. In essence, you will transfer all your existing credit card debts to a new card with offers of even 0% interest available in the market. This option is ideal if you have a good credit score. It is an affordable credit card debt consolidation option.
- Unsecured personal loans – While this is not purely a loan consolidation option, you can still leverage affordable personal loans to repay all the existing credit card debts. There are many online lenders offering personal loans at amazing rates and these loans do not involve credit checks. Within a few hours, you will have the money you need to settle all pending credit card bills and start repaying the single loan from the new lender.
- Line of credit (LOC) – Your bank or credit union can offer a line of credit to allow you to access a certain amount of money which will then be repaid as per the agreement. This is a kind of revolving fund with a credit limit which works as long as you keep repaying the borrowed amount.
- Home equity loans – Homeowners can now access quick cash using their homes. You can use home equity to get cash to repay all pending credit card debts. This loan consolidation option is ideal because of the low inertest rates and higher amounts you can borrow.
It is advisable to compare Las Vegas companies dealing with loan consolidation. Go for reputable organizations registered with National Foundation for Credit Counseling (NFCC) and the Financial Counseling Association of America (FCAA).The best consolidation loan companies in the city also offer counseling services to ensure you don’t fall into the credit debt trap again. In any situation, make sure you avoid any company that talks about debt management and settlement or any form of negotiation with your creditors. Avoid any third-party agreements if you are looking for debt consolidation services to ensure you get your finances back on track.
Isabella Rossellini is a financial expert and this article is a part of a series covering the actual debt consolidation meaning. She has many year experiences in the financial sector. She is also an avid photographer.