Credit Card Debt Consolidation Guide
URL: http://www.mortgageloan.com/credit-card-debt-consolidation-guide Author: Catherine Brock Published: May 17, 2007
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Credit Card Debt Consolidation Guide http://www.mortgageloan.com/credit-card-debt-consolidation-guide
Credit Card Debt Consolidation Guide
Credit card spending can quickly spin out of control, leaving behind an enormous, seemingly impossible repayment burden. Consolidating all that credit card debt into one fixed payment might be your first step in righting those out-of-whack finances.
Americans have few limitations when it comes to spending money; in many ways, it's the new American pastime. But when people find themselves over-burdened with debt, they're often at a loss for how to heal their financial woes. If you're feeling the pinch of too much debt, credit card debt consolidation might be your best remedy.
Where to begin
Your objective in pursuing a credit card debt management solution might be to avoid bankruptcy, to stop creditor phone calls, or to ease the oppressive weight of multiple monthly payments. You aren't alone in feeling overwhelmed-thousands of Americans are saddled with similar circumstances.
The first decision to make is whether to consolidate on your own or work with a debt relief agency. If you choose to go with an agency, you'll be assigned a credit counselor who'll guide you through the process. Your counselor will also help you create a budget that itemizes your living expenses, debt repayments, and spending allowance.
Start by meeting with several agencies to find out how each handles credit card debt settlement. Specifically, you'll want to know how the process works, what fees are charged, and what you can expect going forward. You shouldn't need to provide detailed financial information just yet; but be prepared to discuss your general circumstances.
Debt consolidation options
Here's how the process of debt consolidation works: You obtain one large loan, and use the proceeds to pay off several smaller credit card debts. The interest rate on the new loan should be lower than the rate
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Credit Card Debt Consolidation Guide http://www.mortgageloan.com/credit-card-debt-consolidation-guide
carried by your credit cards. As a result, your monthly payment obligation will also be lower.
There are two general loan categories to consider: home equity loans and consumer loans. A home equity loan is less expensive and easier to obtain than a consumer loan. It can be structured as fixed-rate, fixed-term loan, or adjustable-rate line of credit. For debt consolidation purposes, the fixed-rate loan is preferred. A line of credit offers too much flexibility, which can be disastrous when you're working towards a debt-free existence. Keep in mind that the home equity loan is secured by your house, so you must be committed to making the payments as scheduled, or you could lose it.
If you aren't a homeowner, you'll need to consolidate with a consumer loan. Normally, this would be a fixed-rate, fixed-term loan with a steady monthly payment. Upon loan funding, you should know exactly how long you'll be making the monthly payment and when your debt will be fully paid off.
There's no doubt that getting into debt is far easier than getting out of it. But since you have to start the healing sometime, you might as well begin today.
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