Eliminating the high credit card interest is a great way to deal with your debt problem. What makes this type of debt so hard to get out of is the high interest that gets added to your balance month on month. As long as you have a balance, you can expect that it will continue to grow significantly as both interest and finance charges are added.
This is why targeting the high interest is a good way to approach credit card debt relief. Fortunately, there is an option that will help you achieve this – debt consolidation. There is more than one way to consolidate your debt and we will tackle them in this article one by one.
Debt consolidation loan is the first option. This refers to applying for a loan that is big enough to pay off your existing credit cards. Personal and secure loans have a lower interest rate than your current so that particular goal is already reached. However, you need to have certain qualifications to avail of this low rate. If you will get a personal loan, you should have a high credit score. If you don’t have that, you should have a collateral so you can qualify for a secure loan. These two (credit score and collateral) helps portray you as a low risk borrower. It means the chances of you defaulting on your payments is low. Because of that, the lender does not need to protect themselves by imposing high interest on your loan.
If you cannot qualify for a low interest budget, you may want to opt for balance transfer cards. This means you get a new credit card that offers a zero interest introductory promo. What you will do is to transfer the balance of your high interest credit cards to this new account. You will be asked to pay around 3% of the transferred amount as a fee. Since there is no interest for at least 6 months, any payment that you will make will only be deducted to your principal debt. This will allow you to significantly reduce what you owe. The key to make this work is to take advantage of the introductory period because once it is over, the card will assume a high interest rate that is most common in credit cards.
These two options do not require a professional to help out so if you are intent on using them, you should arm yourself with discipline and self control. There are so many temptations to use the zero balance credit cards so make sure you keep them or close them off already to avoid putting yourself deeper in debt.
There is another option to consolidate loans but the interest rate is not a guarantee. It is known as debt management. In this option, you will work with a debt counselor who will help you come up with a plan. They will negotiate with the creditor to allow you to pay a lower monthly contribution. They will try to ask the creditor to lower the interest but it will not be a guarantee.