Consolidate Credit Card Debts
If you have multiple credit cards, and it seems that the amount you owe each month is going up and making it more difficult to pay, then the chances are you will consider whether to consolidate credit card debts at some stage. The consolidation of such debts is a common practice, which is not surprising given the millions of people who are having credit card debt problems, coupled with the number of lenders, both sides of the Atlantic, marketing consolidation loans.
The attraction to consolidate credit card debts is fairly obvious, especially once you look at an example such as the one below:
| Credit Card | Debt | Monthly | Interest | Monthly | Monthly |
| Owed | Interest | To Pay | Minimum | Minimum | |
| Monthly | Payment | Payment | |||
| $ | % | $ | % | $ | |
| A | 3000 | 1.50% | 45 | 5% | 150 |
| B | 1500 | 1.75% | 52.50 | 4% | 60 |
| C | 2300 | 1.75% | 40.25 | 4% | 92 |
| D | 3000 | 2.00% | 60 | 4% | 120 |
| Total to consolidate | 9800 | 197.75 | 422 |
This is just an example clutched from the air, but you can replace the figures with your own. To continue with this example, the credit card debt totals 9800 spread over 4 credit cards. The owner of the cards is spending $197.75 on interest alone, while their minimum monthly payment is $422. It would be very likely this card holder would consider credit card consolidation, as a way to ease his monthly payments and reduce interest charges.
In reality, if you want to consolidate credit card debts you should look around to get the best rate from lenders. However, once you have listed your current credit card details as the table above, you can play around with the calculator below, which is for a straightforward repayment loan. Following on from the example, a loan amount of $9800 at 7% interest over 5 years, could be repaid at $194.05 per month.
As you can see, it does appear attractive to consolidate credit card debts in that example, but do bear in mind your own figures and loan possibilities could be very different. So, you do need to shop around and calculate carefully, weighing up the pros and cons. You need to take into account any costs for the loan.
Another thing to bear in mind if you do consolidate credit card debts is that, depending on your country, this will go on your credit report. You need to balance that with the opportunity you have to get your finances in order over a 5 year period. If you can stick to it, without building up additional debts again, then it could be worthwhile.
If you are unsure whether consolidation is good for you or have any doubts, it is best to seek a credit counsellor, to help you set out the advantages and disadvantages, as well as work out some figures. If you do decide to consolidate, and are successful in getting the consolidation loan, then it is a great time to get into the budgeting habit. That will stand you in good stead for way past the 5 years.
Come Back Again Later