You can consider debt consolidation as a financial strategy. When you consolidate debts, you can merge bills into a single debt and can pay that amount through a loan.
Generally, this debt consolidation rolls on high-interest debts like credit card debt. Besides, it helps you to reduce debt by lowering the interest rate on your bills.
If you are juggling between multiple bills, you can apply for debt consolidation to tackle on your own. You should know that debt consolidation has two major forms. So, you can apply for a loan to clear out your debt or sign up for a debt management program.
If you are struggling with debt and don’t know how to Consolidate Credit Card Debts, then go through the information that is mentioned below.
How Does Debt Consolidation Work?
With the help of the debt consolidation, you will not have to juggle between multiple bills, as it focuses your debt payments into one bill.
- If you are struggling with the consolidate credit card debt issues, you can apply for a 0% interest, balance-transfer credit card. This type of card offers zero interest during the promotional period. At that time, you can transfer all your debts through this credit card.
- There is another option that suggests applying for a fixed rate debt consolidation loan. When you are approved for this loan, you can use this money to clear off your consolidate credit card debt. After that, you can pay back the loan in instalments for a certain period of time.
What is the Best Way to Consolidate Debts?
So, have you debt consolidate all your debts with one lender? If yes, then it will help you to become stress-free. If you want to get rid of credit card debt, you need to combine multiple bills into a single bill. This will help you to pay a lower interest rate.
Fortunately, there are various ways that you can implement on your own to debt consolidate your credit card debt.
Negotiate With a Credit Counseling Organization
If you are living in the UK, you can find various nonprofit credit counseling organizations. So, if you want to consolidate credit card debts, make sure to negotiate with a credit counseling organization.
They will review your current situation first and create a debt management plan for you. They will provide various advice about budgeting, credit issues, and many more.
Sometimes, it can be possible that you work with a credit counsellor. Before getting started, you need to research the organization to check whether it is reputable or not. Besides, the credit counseling organization helps to set up a debt management plan with your creditors.
You will have to make one monthly payment to the organization. They will also help you to reduce the interest rate by discussing the matter with your creditor. But there are some organizations that charge a fee in order to provide you with this service.
Debt Consolidation Loan
Many debtors keep asking this question “how to consolidate my debts?” But, most are not aware that debt consolidation loans might help to free them from this situation.
With the help of this loan, you will be able to debt consolidate all your debts. Hence, to get this loan, make sure to apply to the major banks or the non-profit debt consolidation companies.
You should be conscious before dealing with the consolidation companies as there are many fraud companies across the UK. Also remember, you often need to pay extra fees in such cases.
Utilize a Balance Transfer Credit Card
With the help of the balance transfer, you can move a balance from one account to another. You will not have to pay any interest as it offers a 0% APR during the introductory period. But, when the introductory period is over, you will have to pay the charges.
You should not transfer balances between cards that are issued by the same lender. Hence, try not to make late payments as it can cancel the introductory APR offer.
Apply for a Personal Loan
If possible, you can apply for a personal loan as it helps to consolidate debt. Moreover, to free from the credit card debt, you can take a debt consolidation loan from a fund. This will help you not to juggle between many payments, as you have to make one payment each month.
If you want to qualify for a lower interest rate, make sure that you have a good credit report. When you are applying for a personal loan, you might get flexible repayment deals.
But you should know that qualifying for a personal loan is not easy as you have to qualify for the lender’s eligibility. You might have faced financial issues in the past and it can be a reason for not becoming eligible for the personal loan.
So, there are some lenders who might charge an organization fee from you in this regard.
Apply for the Cast-Out Auto Refinance Loan
There are some lenders who offer you cash-out refinance auto loans if you have credit card debt. Then you are allowed to use equality in your car to qualify for the debt. But, if you do not want to lose your vehicle, then make the monthly payments on time.
Fasten Home Equity Loan
If you have any assets that have an equal value to your home, you can apply for this loan. This loan allows you to pay a lower interest rate than credit cards and personal loans.
However, if you do not make the on-time payments, you can lose your home and the lender has the power to begin foreclosure proceedings.
Is Debt Consolidation the Best Option for you?
Sometimes, it can be possible that debt consolidation is not the best option for you. So, if you are struggling with debt, you need to change your spending habits fast. Moreover, if you are considering to apply for the debt consolidation, make sure to keep your credit card away. That will help you to get rid of your financial crisis and debts.
- After making a serious monthly budget if you can not stick to it, then Debt Consolidation is not the best option for you.
- If you are planning to take a new loan to clear your old debts, the bills will never end. Hence, you should not consider applying for debt consolidation in such a scenario.
- If you can not make the monthly payment at a certain time, you should not consider debt consolidation.
Sometimes, debt consolidation can be a good idea for you. Let’s take a look at a few situations when you can consolidate your debts:
- If your total debt does not exceed 40% of your gross income, you can think about debt consolidation. But you need to keep in mind that the mortgage debt is not included in it.
- You can qualify for the low-interest debt consolidation loan by ensuring that you have a good credit score.
- When you are able to pay constantly to cover up your debts, you need to consider debt consolidation.
Alternative Options for Debt Consolidation
When you are struggling with debt consolidation , you might think that debt consolidation is the right option for your situation. But sometimes, it might not suit your financial situation and you need to go with the alternatives.
Some of the alternatives to debt consolidation are bankruptcy, debt settlement, etc. But, both the alternatives have advantages and disadvantages, which are discussed below.
While struggling with debt, you can consider this option to pay off the debt. You need to keep in mind that there are some pros and cons.
Bankruptcy provides you with a second chance to overcome your financial crisis. If you are approved for the bankruptcy, then you will not have to lose the exempted items like retirement savings, car, house, etc.
But, you are not allowed to use the credit cards when applying for bankruptcy. Also, most of the possessions can be sold in order to pay to your creditors.
When you are not able to make the monthly payment for your debts, you can try for the debt settlement. You should know that national debtlines settlement helps you to reduce your payments as much as to 50%. This settlement helps you to avoid court proceedings as well.
But if you make late payments, then you have to pay for it even if the interest rate is high. So, there are many companies that do not accept debt settlements. Also, it can damage your credit score for seven years. <