Credit card debt consolidation might be a good thing if your credit card debt is overwhelming you.
Do you feel there is no way out, to catch up and get on top of the bills?
Are you falling behind in payments or missing payments altogether?
If the answers are yes, then a credit card debt consolidation strategy could be the lifeline that you need. This is especially so if you already had balances on your credit cards before you started using them for your holiday shopping. When the bills arrive this month, you will be faced with even higher credit card balances. Unless you saved or received some cash over the holidays, your credit card debt situation is about to get worse.
The more you fall behind, the harder it will be to get your financial life in order again. Furthermore, falling behind on your bills, or skipping payments will only cost you more money later, and not just in higher interest rates and additional fees. Your credit score will plummet. With a poor credit score, you will pay more for everything, be denied financing, and possibly even a job, car, insurance or a rental lease.
If you are feeling lost in a credit card debt blizzard, the best shovel might be a credit card debt consolidation loan.
How Much Credit Card Debt is Too Much?
According to the Federal Reserve, credit card debt increased by $36 billion during 2018. Experian produced a report in 2017 stating that the average American consumer carries a credit card balance of more than $6,000. And, according to surveys, at least 44% carry their balances from month to month. With average interest rates ranging from 16-23%, credit card debt can cost you a lot of money.
Here’s how to know if you’re in the credit card debt cyclone:
- You can’t make the payments. Or, you’ve got kind of a juggling act going, using one credit card to pay the bill on a different credit card.
- You can only pay the minimum due on your credit card bill, extending the length of your debt.
- Your debt-to-income ratio is high. This can also impact any future purchases you want to make, such as a car or home. Lenders like to see a debt-to-income ratio somewhere between 30 and 40%. Obviously, the lower the better.
- Your credit utilization ratio is out of whack. It shouldn’t be higher than 30%.
- You can’t sleep at night.
Do You Have Other Options?
There might be some other ways to deal with your credit card debt.
If you have a good record with your credit card companies, you might be able to work out a payment plan. Call the number on the back of the card and explain your situation. They may be willing to at least delay any increase in interest rates or additional fees.
You can transfer all your balances to a balance transfer credit card. It will likely cost you a transfer fee, but the balance transfer will be interest-free. HOWEVER, if you don’t pay off the debt before the interest-free period is over you could be facing interest rates of 20% or higher. This option will not be available to you if your credit is fair or poor. Your credit score has to be good or excellent to qualify for a credit card balance transfer card
Why a Credit Card Debt Consolidation Loan Might Be Better for You
- A personal credit card debt consolidation loan places all of your credit card debt into one basket. You might improve your interest rate. You will definitely escape the rising interest rates and extra fees that you incur due to late and skipped payments.
- With a loan from a peer-to-peer lender, your loan payments are automatically deducted from your bank account.
- Your credit score will improve because your payments are always on time.
- A credit card debt consolidation loan will put you back in the lane toward your financial goals and peace of mind.