Credit card loan consolidation is a strategy that makes debt payment manageable by combining old debts into a new one that has better terms such as a lower interest rate and shorter payoff period.
Several options can be adopted to consolidate credit card loans; they include an unsecured personal loan, a 401(k) loan, balance transfer credit loan and line of credit or home equity loan. Using any of the options depends on your financial situation such as your credit score and history, the overall debt load, available cash. However, you get the best result when your aim of consolidating your credit card loan is to become debt free.
A credit card loan consolidation is of two types; Secured and Unsecured. A secured credit card consolidation loan – where the amount borrowed before is secured against an asset, such as a landed property like your home and the lack of repayment may lead to the loss of your home. On the other hand, unsecured loan – where the loan is not secured against any assets. You are offered secure loan when you have a poor credit history or when the amount you owe is much. However, before you take any credit card loan consolidation, you should get a free debt advice to avoid piling up more problem in the future.
You should consider loan consolidation:
If the interest rate is lower than what you were paying on the previous debt. Though this can be higher if the repayment period is longer.
If you use it as an opportunity to get back on track by cutting down on how you spend.
When you can afford to pay up till the loan is repaid.
When any savings are not cleared by charges and fees
It is imperative to think about the future uncertainty that may make you not to fulfil the payment such as falling ill when taking debt consolidation loan. Before you choose a debt consolidation loan, think about anything that might happen in the future which could stop you from keeping up with the repayments.
If a credit card debt consolidation loan does not clear all your debt of you know you cannot afford to fulfil the payment of the loan, then you should not take the loan. Also if the monthly repayment and the period of repayment are longer, it is advised not to take such debt consolidation loan. Never take any loan that puts your home at risk. It’s nice to think of the potential downside of a loan before accepting the terms. Consolidating your credit card debt into an unsecured personal loan is very good especially when you have a good credit score.
Getting advice from a professional before you take any step will help you to get the best option of a credit card debt consolidation loan. No matter your credit score and history, there is always a good deal to consolidate your debts. Don’t be pushed into the corner to accept consolidation loan terms that will lead you to more problems later.
Leave a Reply