Consolidating credit card debt and credit score
Whether you should consolidate your credit card debt depends on your individual circumstances and the terms of the consolidation.
If you are struggling to keep up with your monthly payments, consolidating your debt in this way can certainly help alleviate financial stress.The first is the kind you describe, where you apply for a personal loan, preferably one with a relatively low interest rate, and then use the money from that loan to pay off all your credit card balances at once.Once all of your other accounts are paid in full, there is only one payment to make every month – the one to the new lender.If you are struggling to pay off multiple credit cards, consolidating your debt may allow you to reduce your interest rates and lower your monthly payment.However, a lower monthly payment can mean a longer repayment term and more interest paid over the life of the loan.Monitor your progress regularly to help you stay on track and motivated to reach your goals. You should decide the order in which you will pay off your debts.
Paying for your purchases with cash instead of credit will help you separate your needs from wants, remain conscious about your spending, and make you think twice before spending money.
One way to speed up your debt repayment and get out of debt fast is by reviewing your monthly expenses and looking for opportunities to cut your costs.
Start by tracking your spending for a two-week period to become aware of where your money is going (one month is even better).
It’s important to set for yourself realistic goals for paying off your high interest credit cards as well as other types of consumer debt (overdraft, line of credit, vehicle loans). Make a complete list of all of your debts (outstanding balances, interest rates and charges) and prioritize them in order of importance.
While it is easy to run up in a short period of time, it takes time and self-discipline to pay them off. Mortgage payments and vehicle payments are typically at the top of most lists as these provide your shelter and transportation to get to and from your job. Many people want to get rid of their highest interest rate debts first, and others have specific debts like payday loans they want to eliminate first.
When you obtain a debt consolidation loan, you pay off all of your outstanding credit cards with its proceeds.