Debt consolidation, like any other techniques of moving away from debt, you need to have a solid plan for overcoming the vicious cycle. An integral aspect of debt consolidation is to consolidate your debt without affecting your credit score. The method of debt consolidation will largely affect what you will get. When you consolidate credit card debt, the borrower is allowed to roll multiple debts into one. Ideally, this new debt has a lower interest rate. Your lender will negotiate for a better interest rate and your rates will be lower compared to the other. Before you opt to consolidate credit card debt, you should ask yourself the following questions.
Is this the right time to consolidate my debt?
In most cases, borrowers opt for a new loan to cover multiple loans previously under repayment plan. Consolidating loans is a good strategy for you to overcome excessive debts. Take your time to look for a lender who understands your situation and who will be able to guide you through the process. You should time your debt consolidation plan to be in tandem with your long-term plan to overcome debt.
Is my debt manageable?
Once you fail to meet the deadlines of creditors, then there is a high possibility that you are in too much debt. You should use a realistic method to get out of the debts. This is possible if you plan your finances well and use a loan with a manageable interest rate to get rid of the loans. Once you have one loan to repay, you will be in a better position to settle all your debts after the agreed period.
- When you consolidate your credit card debt, you are seeking a better interest rate and a debt that you can repay the loan within the required time. Debt consolidation is known to reduce the amount of interest that you pay each month.
- It is beneficial because you will reduce the number of creditors and the interest rate that you pay monthly on the loan.
- You can also improve your repayment ability by reducing the amount of debts you may have.
If you are struggling to repay several small high-interest loans, unsecured consolidation loan could be the best option for you. There are several ways of consolidating debt and based on your circumstances, you can get more value from the consolidation loans.
How do I consolidate my credit card debt?
You have several options:
- Take out debt consolidation loan to clear your credit card debt
- Take a new loan with lower interest and repay all your loans
- Get your lender to manage the debt for you and then you will repay the loan.
There are challenges with each option. However, it is essential to note that we will connect you to the many lenders in our network. Some of the options that you can utilize when looking for a lender include:
1. Work with a debt management lender
If you are facing difficulty in repaying your loan, the most essential thing you need to do is to use a lender who has better management skills than you. When you have your lender manage your debt, you will be in a better position to get out of debt. A debt management plan will provide you with the essential information you need to negotiate with your creditors on the best solution for your credit. Missed payments when repaying a debt consolidation loan could damage your credit score. However, in most cases you will not have to go to this extent if you choose a lender from our network. Once you have filled out a simple loan request form, we will connect you to lenders who will finance the loan.
2. Allow your lender to negotiate on your behalf
For many people with debt, it could be difficult to negotiate with your creditors because they would be focused on you dealing with the debt rather than giving you a better deal. You can give your lender the chance to negotiate a deal on your behalf. Your lender will negotiate for a better deal and repay the entire existing loan to your creditors. Some creditors may accept a lower interest rate to allow you to pay the amount that you owe them.
3. Take out a debt consolidation loan
This is a common method which many people embrace when it comes to dealing with several loans that you are unable to follow up effectively. Generally, debt consolidation allows the borrower to monitor the loans effectively and overcome the challenges associated with other forms of repayment. In some cases, a personal debt consolidation could be an option if your credit score is considerably low. This helps you streamline all your payments rather than look at managing multiple payments.
4. Transfer credit card balances to a no interest card
This is another option for consolidating your credit card debt. However, it is not viable to many people because of poor credit history. You can use lenders in our network who will help you.
Does credit card debt consolidation affect your credit?
How your credit card consolidation affects your credit score will depend a lot of factors. These could include outstanding debts, interest rates and the type of consolidation plan you choose. You will be able to plan your finances, repay the loan on time and get back to a better financial position.
- Financial experts recommend that you do not use credit card debt consolidation as a way to avoid repaying your loan. It is imperative that you plan for your long-term finances and avoid a vicious debt cycle. Once you repay your debt, your credit ratio will improve and this gets you a positive credit score.
Debt consolidation is not the right choice for people who have a long-term financial plan that will help them overcome debt. Consolidating loans could help you if you have the following:
- Your debt is manageable. The debt should be less than half of your annual gross income.
- Your have unsecured debts
- You are committed and serious that you will repay the debt within the period
- You are confident that you will repay the loan within the time frame.
- You are learning a new way to manage debt.