Use Credit Card Debt Consolidation To Get You On Your Way To Becoming Debt Free

So you have decided to pare down your credit card debt

. Good for you! As far as financial decisions go, this is one of the best you can make. Paying minimum credit card balances and juggling monthly payments can cost you thousands of dollars and create a great deal of stress. One good tool for getting rid of those monthly payments is credit card debt consolidation.

Simply put, credit card debt consolidation is taking out a new loan that will cover the balances you are carrying on your revolving credit. This creates one monthly payment instead of many. Since credit card balances typically have high interest rates, the goal is to get a considerably lower interest rate. When combined into one manageable monthly payment and a well designed budget, youll be on your way to being debt free in no time at all.

There are four primary tools that you can use for credit card debt consolidation:

Mortgage refinancing with cash out

Home equity loans

Personal loans

Credit card balance transfers

Because they are backed by your home as security, mortgage refinancing and home equity loans typically offer you the lowest interest rates. Personal loans are granted based on your good credit and are best secured through your current bank or credit union. Credit card balance transfers work best if you are trying to consolidate a relatively small amount of debt. They also carry hazards since a missed payment can trigger big hikes in interest rates.

So which credit card debt consolidation tool is right for you? Well, that all depends on your personal circumstances. Some people prefer not to use their homes as collateral and this works best if you have equity in your home.

Regardless of what credit card debt consolidation method you choose, you will need to have a good accounting of what you currently owe, the interest payments, the monthly payments, your income, and all your non-debt monthly expenses. This will help you determine how much you need to borrow and how much you can afford to pay off each month. You will also need this documentation when you begin the process of applying for credit card debt consolidation loans. To make the process work, you need to be honest about just exactly how much you have going out the door each month. Chances are, you will be a bit surprised when you see exactly where your money is going each month.

Now that you are armed with a good snapshot of what you are up against, you can start to shop for credit card debt consolidation loans. The easiest place to start is with the interest rate. You will want to make sure that the loan you are targeting has an interest rate that is low enough to get you a monthly payment that is considerably less than what you are already paying. There are no hard and fast rules on this but 2 to 3 points is considered a good benchmark. You should also take a look at fees that may be associated with the new credit card debt consolidation loans.

Once your new loans are in place it is up to you to avoid the temptation to incur new debt on top of your new loan. With some discipline and patience youll see the balances on your debt start to fall and notice that you actually have more money to spend. If you apply some of this new found money to the balance on your debt you can speed up the process. Before you know it youll not only have your debt under control but youll be one of the lucky people that lives debt free.

by: David Nalin

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