Should You Consolidate Your Credit Card Debt?
Are you tired of watching your credit card debt grow? Maxing out your credit lines? Or just, paying back too many bills?
Credit cards are not only useful, they are a basic necessity in today’s marketplace. If you want to order items online, rent a car, or take a vacation you will need that magical card.
There are many different types of debt including credit card debt. Of course, you don’t have to build up credit card debt, but many consumers do utilize their line of credit.
In fact, according to the New York Federal Reserve's Regional Household Credit and Debt Snapshot, credit card debt was the most popular type of credit.
Nationally, for the fourth quarter 2015, only 26% of consumers had mortgages, whereas almost 54% of consumers had credit card debt.
The NY Fed also estimated the average credit card debt, for those consumers that had credit card debt was $5,700.
Three Reasons to Consolidate Credit Card Debt
There are different reasons to run up credit card debt due to varying financial situations. Some people just mismanage their finances and end of paying high interest rates and credit card fees. Others use their credit cards instead of leveraging their home and taking out a long term loan.
Many people run up credit card debt due to a financial hardship caused by a drop in income, job loss, divorce, or serious medical hardship. Their only short-term option may be to use a credit card and wait for better times.
Here are three reasons to consider credit card consolidation including appropriate tactics to help you get debt free:
Sloppy Financial Management: If you are paying high interest rates and just making minimum payments, then you are paying too much for your credit card debt.
Credit Card Consolidation Solutions: Look for a personal debt consolidation loan. If you have good to excellent credit, then you can get a low interest rate and pay off your debt over a short-term, generally between 2-5 years. Remember, to get your budget in order and don’t run up your debt again. If you have a home with equity, then consider talking out a cash-out refinance mortgage or a home equity loan. These credit card consolidation mortgage loans offer a low monthly payment and low interest rate. However, since they are long term loans, you will end up paying more interest over the life of the loan.
Poor Financial Management: If you are not on top of your budget, don’t have sufficient emergency and saving funds, can afford your monthly payments, but have high interest rates, then you need some help with your debt.
Credit Card Consolidation Solutions: A Credit counseling program will offer you professional help to organize your budget and implement a financial plan to improve your situation. If appropriate, you will be enrolled in a Debt Management Program (DMP) that offers one payment to your creditors at negotiated lower interest rates. This plan is a good alternative if your credit is not good enough to get a debt consolidation loan.
Financial Hardship: If you have suffered a loss of income, medical hardship, or other personal hardship, then most likely you have turned to credit cards to help tide things over. Maxing out available lines of credit and falling behind on payments will cause a drop in your credit and a ton of stress.
Credit Card Consolidation Solutions: There are a number of possible solutions depending on your overall financial solutions. One program, debt settlement, will help you negotiate your credit card debt. If you are seriously struggling and cannot afford the monthly payments, then consider a bankruptcy.