Few people would deny that the American economy is in crises. As unemployment rises, many find themselves turning to credit cards to make ends meet. To make matters worse, advertising pushes consumers to spend more than they have. Credit Cards allow millions to receive instant gratification that they would not otherwise be able to have.
So what are your options if you are looking for consolidation credit card options?
Get a Debt Consolidation Credit Card
If your credit is still fairly good, you may be able to get a single credit card to consolidate all of your credit card debt. Ideally, you want a credit card with both a low introductory rate and a low rate long term.
The key to making this strategy work is to cut up your old high credit cards! Don’t tell yourself that you are keeping them around for emergencies. If you’ve fallen into the credit card trap once, falling into it again will be easy. Credit cards can be like an addiction and if you know you can’t handle them then you should cut them up! Whatever you do though, don’t close the accounts – this will actually hurt your credit score!
Home Equity Loan or Second Mortgage
Another option when considering credit card consolidation loans is to tap the equity in your home.
The advantage to this strategy is that because you are getting a secured loan, the interest rate will be lower. Additionally, you may be eligible for tax benefits. (Be careful here, a lot of people actually deduct interest that technically shouldn’t be deducted.)
I would give you a big caution when considering this option. It is very risky to transfer unsecured debt into secured debt. Even more so when you are putting your home at risk!
For this reason, this option should only be considered when you are finally at a place where you are ready to be responsible with your finances and stick to a budget. Don’t be one of those people who pays off their credit cards with the equity in their home only to find themselves in debt again two years later.
Use Credit or Debt Counseling to get a Credit Card Consolidation Loan
The last option would be to consider working with a credit counseling company or debt counseling service. Some of these services are able to offer you a credit card debt consolidation loan.
Essentially what happens is that a counselor looks at your overall situation and negotiates with your creditors to reduce the interest rates, fees and payments on your accounts. They try to create a win-win situation where your creditors get paid and you get back on track.
The challenge with credit counseling for credit card consolidation is that entering into credit counseling will seriously harm your ability to get credit in the future. For all practical purposes, you will be treated as if you filed Chapter 13. For this reason, it is something that you should consider only as a last result.
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