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Credit
card consolidation is a popular solution for those
with significant
credit card
debt, usually distributed on three or four
different cards. Basically, this means putting all
your debts together on a single card, like
transferring it all to one loan. Of course, the
goal is to pick a card that offers better
conditions than what you already have, in order
not only to simplify, but also to reduce your
payments.
Since
there are so many offers out there, and lenders
fight over your business, you can sometimes find
solutions that can save you thousands of dollars
per year. If you consolidate your debt to a credit
card with low interest and 0%
balance transfer,
you can save considerably, and pay off your credit
sooner (which, of course, is the main goal when
dealing with credit card debt).
The
most serious mistake people do when consolidating
is to go though the entire process just to
simplify their accounting, and they don't pay
enough attention to how much they could save.
Another mistake is to close your zero balance
accounts when consolidating. This practically
means you close some of your credit options, which
is never a good idea.
When you plan to consolidate, call your banks and
explain the situation. They want your business,
and you'll be surprised how flexible and willing
to negotiate they can be, once you explain to them
that you have various options available to take
your business someplace else.
There are many web sites offering solutions for
debt consolidation. However, keep in mind that,
while this is a comfortable and fast solution, you
don't have the options to negotiate directly with
the banks. Also, most often the best offers come
from banks that want to keep your business, so
make sure you give a change to the banks you've
had a long-term relation with. If you're not
pleased with the results, take your money
elsewhere quickly.
Consolidation is often a necessity for students,
new graduates, or people who have filed for
bankruptcy some time ago. If you've handled your
payments well and managed to clear up your record
to a certain degree, there is no need to continue
paying more than it's worth for your
credit cards.
Sit down and go through the numbers carefully, and
think analyze the problem realistically. Don't
forget to check your
credit report
and your
credit rating
before you start anything - it will help you plan
and plead your case. Also, if your credit request
gets rejected, don't forget to ask for your free
copy of the credit report.
Of
course, credit card consolidation is not a miracle
solution for all your financial problems. On the
contrary, you may find that it requires a lot of
financial discipline to make the payment on time
and to straighten things up. However, it is less
confusing than having several small credits, and
so it is easier to keep things under control.
There is also the option of getting credit
counseling, if things get really confusing. A
successful plan will make sure you make the
payments on time and regularly, without putting a
strain on other aspects of your life. Of course,
it's a lengthy process, usually taking one or two
years - but it's worth the trouble.
Sometimes, you can lower costs by consolidating
your debt through a second mortgage - but be
really careful about the hidden costs and problems
- you may want to consult with a specialist or two
before taking this step. Usually, this means that
your home will become collateral, and you may lose
it if things go wrong. Also, costs add up quickly
and you may end up paying more than you initially
thought.
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