Are your credit cards making you crazy? If you feel like you can't keep up, credit consolidation is a good way to reduce your stress. There are several ways to consolidate debt, and doing so has many benefits.
First of all, what does it mean to consolidate your debt? Credit consolidation can take many different forms, and different financial advisors have different ideas about what each one means. We'll go over each one in turn. One way to consolidate your debt is to get a personal loan and use the money from it to pay off your other debt. Balance transfers are another way to consolidate credit. To do this, you need to apply for a new credit card that will let you move all the balances from your other cards to this one new card. Both of these ways to consolidate debt involve opening a new credit account that is not secured.
Borrowing against the value of your home is another option for homeowners who want to consolidate their debts. A Home Equity Line of Credit (HELOC), which is a credit line based on the value of your home, is one way to do this. The money from this new loan would then be used to pay off all of your credit cards. You can also use the increase in the value of your home's equity to pay off debt by refinancing your current mortgage. You would use some of the money from this refinance to pay off your existing credit cards. People often call this kind of refinance credit consolidation a "debt consolidation refinance" because you are combining your old mortgage and your existing credit cards into one new mortgage.
Now that you know what the different kinds of credit consolidation are, it's important to know how they can help you.
Lower Interest Rate: This may be the most important benefit of Credit Consolidation. When you open a new account, the interest rate will be lower than the interest rates on the credit cards you are paying off. This means that paying off your debt will cost you less over time. If you have good credit, you might even be able to get a 0% balance transfer, which means you won't have to pay interest on your debt for a certain amount of time. Also, the interest rate on a secured loan (like a mortgage refinance, HELOC, etc.) is usually lower than the rate on your credit cards.
#!Faster Repayment Period: Lowering your interest rate will save you money in the long run, and you may also be able to get a lower monthly payment. Depending on how much money you have, this may be very appealing. But if you can keep paying the same amount each month after a Credit Consolidation, you'll be able to pay off the new balance much faster than you would have with the old credit cards.
Ease of One Bill: One of the best things about Credit Consolidation is that you only have to worry about one bill each month. This is because the new account you open only has one bill. When you have more than one credit card, you get more than one bill. Most likely, these bills have different due dates throughout the month. This is not only hard to keep track of, but it also makes it more likely that you will miss a payment and have to pay late fees and pay more interest. It's easy to see how one monthly bill can make a big difference in your stress level.
These are just some of the reasons why it might make sense to consolidate your debts. Most importantly, make sure you know what your goals and priorities are, and then choose the type of credit consolidation that best fits your needs.
