According to a WalletHub report in 2016, an average American household owes more than $8,000 in credit card debt – a 6 percent change than the previous year. How did it come to this? Besides the accessibility of credit cards, people get trapped in their debt cycle.
Many people fail to realize credit cards are a form of quick debt. Every time you swipe the plastics, you are borrowing money from the issuer, which is usually a bank. In exchange for the privilege, the company charges you with interest on the unpaid balance.
Thus, the more you pay the minimum or avoid repaying your debt, the more they accumulate, and the more interest you have to settle.
Credit card debts can become so huge they can lead to bankruptcy and other serious financial issues, but there’s a way out: credit card debt consolidation.
How Does It Work?
In a credit card debt consolidation, you take up a loan and use the funds to pay off your existing consumer debt. It could be from one or multiple cards. Through this method, you can take advantage of a lower interest rate and a shorter payment term. Moreover, since you have only loan to think about, you’re less likely to miss your repayments.
While there are various kinds of debt consolidation options, one of the most popular is a personal loan. Unlike a home equity loan, this one doesn’t require collateral. You don’t need to put your assets such as your house or vehicle at risk of repossession if you miss making the repayments.
Depending on the lender, approval can also be very fast. You may have the money you need within 24 to 48 hours. In the process, you get to settle your credit card debts as soon as possible.
But before you consider getting one, you need to know the possible challenges with personal loans:
• Requirements – Since the company no longer asks for collateral, it may require you to provide them your credit score, employment history, and salary. This way, they can gauge if you’re capable of repaying your debt. Among these, the lenders can be very particular about your score, so you need to aim around 700 or higher to qualify fast.
• Interest – Not all interest rates for personal loans are low. Some of them are even higher than those of the credit cards. Before you apply, make sure you can verify the interest rates. You also need to determine if there are other fees and charges to be paid.
Whether personal loans are the ideal choice for credit card debt consolidation depends on many factors. Do you have a good credit score? Can you afford to pay the interest? Does it guarantee you savings in both time and money?
But perhaps the most important question is, do you have the discipline to pay off your debts? In the end, unless you are committed to ending the debt cycle, no amount of credit card debt consolidation will ever work. Visit loansconsolidation.co for more tips. You can also browse through http://southeastern.edu/acad_research/programs/cse/finance/debt/index.html if you want to learn more about what debt is and how to manage it.
Our experts at loansconsolidation.co help you determine if getting a loan consolidation loan is worth it. Should you get one? Join the discussion today!