Pending Credit Card Bills? Consolidate to Get Rid of Debt Via Loans

You all know that settlement of overdue credit card bills is backbreaking. Not only are interest rates high, but also you may have owed from several companies and juggling several monthly repayments. The more delay you make in repayments, the deeper you go into debt.

Consolidation is the common solution but you need to decide how you will consolidate your credit card bills to avoid making your financial situation from bad to worse. Best loans for debt consolidation not only include personal loans but also credit card bills.

What is credit card consolidation?

You will take out a credit card consolidation loan from a new lender to repay existing credit card bills. The goal of the consolidation is to get the new loan at the reduced interest rate and make repayments much more manageable - you will make only one monthly installment toward your new loan.

Factors to consider before consolidating your credit card debt

A debt consolidation loan is not always a good idea. Chances are it will ruin your finances. You need to carefully analyze whether you need to consolidate your bills or not. Consider the following factors while choosing the best loan option:

Interest rates

Debt consolidation is a better choice if you take out a new loan at a reduced rate of interest. More often than not, you end up paying the same or high-interest rate. If you grab such a deal, you will lose control over your finances. Even if you have got a deal at a lower interest rate, calculate the total interest paid. It might be more than the interest of the existing debt.

Repayment terms

The longer the length of the loan, the smaller the installment will be. It is much more manageable than large installments. Make sure that your monthly repayments are lower than you have been paying until consolidation.

Loan options for consolidating credit cards

You can consolidate your loan with the following two options :

Balance transfer credit cards

Balance transfer enables you to pay off pending bills of your existing credit cards by transferring them to your new card. Note that the transfer amount depends on the limit on your new credit card. For instance, you have owed £5500 and the limit on your new credit card is £5000, you will be able to transfer only £5000 including transfer fee.

Balance transfer credit cards offer 0% the interest rate or lower APR. Under this scheme, you will have some definite time to settle your whole debt that may vary from 12 to 18 months. Make sure that you pay your debt within the given time, otherwise, you will end up with paying higher APR.

Personal loans

You need to meet the eligibility criteria to get balance transfer credit cards depending on the policy of your lender. If due to any reason you fail to apply for these loans, you can take out personal loans. They are unsecured loans and hence, there is no risk of losing security. Interest rates are usually lower than credit card rates but higher than balance transfer credit card rates.

Debt consolidation loans can help you save money, but still, you should try to avoid building up credit card bills.