Consolidating Credit Card Debt

Have you considered consolidating credit card debt? If high interest rates on multiple cards is killing you, this might be an option for you. When you go about consolidating credit card debt, you get one lower payment per month.

There are four ways to go about consolidating credit card debt.

1. Take out a home equity loan. A home equity loan is a second, third, or even fourth against the value of your home. You pay off all of your credit cards and secondary debt and make one payment to the bank. There are a number of advantages to a home equity loan to go about consolidating credit card debt. For one thing, home equity loans are about the lowest interest rate loans you can find. Another reason is that if you have equity in your home, these are fairly easy to get. But, be forewarned that if you fail to pay the debt in full each month, you could risk placing your entire home in jeopardy of foreclosure.

2. Take out a personal, or signature loan. A debt consolidation loan is often available from your bank or from a lender affiliated with debt consolidation quotes that you can get for free online. Again, you will pay off all of your high interest smaller loans and make one payment to the bank. While the debt consolidation loan will have a lower interest rate than your high interest credit cards, it will not be as low as a home equity loan. This is because there are no assets backing up the loan. You can also discharge a personal loan in bankruptcy, something you can’t do with a home equity loan.

3. Secure a credit card with a large balance. If you have several small credit card bills, you can sometimes get one low interest credit card and transfer all of the balances to it. Be sure that you close out all of the small cards or else you may be tempted to use them and then have twice as much debt. If you have decent credit, you may be able to get a credit card with a large credit limit. But, make sure that the new card has a lower interest rate than all of the small cards because that is the whole point of consolidating credit card debt.

4. If you are unable to go about consolidating credit card debt by working with lenders or credit card companies directly, go to a debt consolidation firm. These firms work with the credit card companies themselves. Often, they are able to negotiate lower interest rates or even get the principle reduced. Then, instead of paying multiple bills each month, you will make one payment to the debt consolidation company. Keep in mind that there are for profit and not for profit debt consolidation companies. Some of the for profit companies have turned out to be very disreputable. So, do your due diligence before singing up.

You have many options for consolidating credit card debt. You want to choose the one that gives you the best combination of lowest payments per month and lowest overall interest payments over the life of the loan.