Are you masking in credit card debt? Don’t worry because there is some good news for you. By consolidating your credit cards, you can save money and at the same time pay off your debt quickly. All you need is to assess your situation and the options you got. Henceforth, determine whether this works for you. Here are 5 simple Steps to help you handle credit card debt consolidation.
- Evaluate your Debt Load
The first step towards credit card consolidation is establishing the amount of credit card debt you have. Collect all statements for your credit card and sum up all that you owe. Here is what you should establish: your debt load and your estimated monthly payments. Through the use of a debt consolidation calculator, you can now determine whether consolidating your credit card debt is worth saving you some money. This is required in finding the best means of consolidating your credit card.
2.Check your Monthly Income
Know your take-home earnings but remember to deduct your monthly expenses too. This should include your utilities, mortgage, food and so on. There is a chance that you will vary the much you will be paying towards the credit card debt each month. This will be determined by the amount of extra cash you got when the payments are due. Knowing the amount of money available for use on bills will help you establish the amount available for consolidating your credit card.
3.Identify a loan facility to Pay your Credit Cards off
There is no point of paying high interest rates for your credit card. With the use of a personal or home loan, you can easily evade these high interest rates by way of consolidating your credit card. Here are some of the options to go for:
- A home equity loan (HEL) facility. This can be of great use in consolidating your credit cards. You can get this loan at a fixed rate against your home equity. Note that the interest rate for this lone is normally higher than that of your first mortgage. However, it is normally far less than a credit card. Rather than making paying to each of your companies every month, you will only be expected to make a single payment on your home equity loan. For instance, your HEL could interest rate may be as low as 6 percent while that of your credit cards be pegged at 18%. Ideally, this will be a huge difference in your monthly remittance following the consolidation of your credit cards. Even with that, keep in mind that your home equity will not be available to you should you sell your home. Again, the HEL should be repaid once you sell your house.
- Another way to consolidate your credit cards is by way of cash-out refinancing. This involves the refinancing of your mortgage to another with a higher principle to enable you get back some of your home equity as money for your use in credit card debt consolidation. There is a possibility that your monthly mortgage remittance could not even increase with cash-out refinancing. Even if this happens, your final monthly debt will remain less because your credit cards were consolidated into your mortgage. This will be another way to save your money with a low interest. However, your home acts as security for the loan and can be lost should you fail to pay the loan.
- Using a personal loan. In a case where you don’t own a home or don’t want to use your home equity, a personal loan is still an option for you. Look out for a lender at a lower interest rate than your credit card and secure a personal loan.
- Understand the Risks Involved
Whatever means you will be using to consolidate your credit card, it is important to know the risks involved. The advantage is that you will be able to access better interest rates since the loan’s security is your home. However, this is a risk because your home can be lost if you fail to pay the loan. Therefore, carefully consider using your home as collateral prior to jumping in it.
- Manage your Spending
To help yourself get rid of your current debt, restrain your spending. After you have consolidated your credit card, it is important to keep checking your spending. Otherwise, you can easily fall into the trap of running up increased credit card debt interest rates.
If it makes sense after looking at these consolidation options, you can go ahead to consolidate your credit card now!