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Credit Card Debt Consolidation Guide

If you are only able to make the minimum payments your credit card balances, you need help with debt.  The best way to do that is with a credit card debt consolidation loan.  The best time to do begin to get out of debt is always now.

Can I Benefit From A Credit Card Debt Consolidation Loan?

One of the main ways to debt relief is to consolidate debt into one lower interest loan.  Consider these factors when determining whether or not such a debt consolidation plan is right for you.

  • Multiple cards with large balances,
  • Large monthly payments on the multiple cards,
  • Increasing balances over time, and/or,
  • One or more of the cards is maxed out, or near its credit card limit

If one or more of these circumstances apply to you, a debt consolidation loan is a smart choice to ease the burden while assisting you in getting out of debt efficiently.

Getting Started With Debt Consolidation Loans?

In its simplest form, credit card debt consolidation involves consolidating credit card debt into one, lower interest loan.  Therefore, in doing so, your goal should be to lower your interest rate (and monthly payment if possible) on the new consolidated credit card loan balance.

However, no consolidation strategy will not work unless you exercise the discipline to use the savings to pay more on the loan principal each month.  Discipline also means searching for ways to decrease monthly expenses and applying those savings to reduce principal on the debt consolidation loan.

You simply have to live on a cash basis while repaying your debt and avoid spending more money than you have.

Here Are Some Debt Consolidation Options

In the tight credit market that we have today, the best debt management options are available to those with high FICO scores.  You cannot afford to wait until you have bad credit to implement a debt consolidation strategy.  You must begin to look for consolidation loans at the first sign of financial difficulty.  Here are some options to consider for consolidating your credit card debt:

  • Transfer balances to a low interest credit card. Interest rates on these cards run as low as 7.00% if you have a very good credit score.
  • Use balance transfers to consolidate balances. Credit card issuers are still sending out balance transfer checks which offer a low interest rate for the life of the balance (some as low as 3.9 to 4.9 APR) or some shorter time period.  You will have to pay a balance transfer fee in the amount of 3-4%, but it still represents an excellent opportunity to consolidate credit card debt.
  • Open a HELOC. If you own your home, you can take advantage of your home’s equity as a source of low interest lending.  Unfortunately, this option may not be as readily available as it was only a few short months ago.  Most home values have plummeted, leaving the homeowner with very little (or no) equity to draw upon to consolidate debt.
  • Negotiate with your credit card company. Use the current economic climate as leverage to negotiate balance transfers into one of your lower interest rate credit cards.  This may lead to derogatory entries on your credit report so be careful if you already have excellent credit.

These credit card strategies are only available to consumers with good credit scores.

Consumers with bad debts or poor credit scores will have to explore other means to achieve their debt consolidation goals.  But, even if you have bad credit, it makes no sense to do nothing.

What About A Non-Profit Debt Consolidation/Credit Counseling Company?

A good nonprofit credit counseling company can put together a debt consolidation program and can negotiate credit card debt relief for you.

Contact the National Foundation For Credit Counseling to find a list of reputable consumer credit counseling and debt consolidation organizations in your area.  A good non-profit credit counseling company will often be able to get people out of debt easier than going it alone.

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