Using a Consolidation Loan for Credit Card Debt

If you are drowning in credit card debt, a consolidation loan might be just what you need. In times of economic trouble, credit card debt can become a serious problem for many. The good news is you can get rid of your credit card debt with various types of debt consolidation.

What is a Credit Card Balance Transfer? 

A credit card balance transfer can be ideal for anyone that has a lot of credit card debt. A credit card balance transfer involves transferring your credit debt to one card that has a lower interest rate associated with it. Businesses often encourage balance transfers by offering a credit card with a low introductory rate. This rate will eventually go up.

While a form of debt consolidation, a balance transfer is not always recommended. It is true that the process can result in a reduction in your interest rate payments for a short period of time. However, if you are unable to clear the debt before the introductory offer ends, the interest rate will jump and you could find yourself in trouble. 

What is a Debt Consolidation Loan? 

A debt consolidation loan comes in many forms. It can be obtained from your local bank, a credit union, an online loan consolidation company, or any other financial institute. 

If you use a debt consolidation loan, all of your credit card debt will be added up and one loan will be issued for the entire amount at a significantly lower interest rate. You’ll only have one small payment to worry about. A debt consolidation loan can improve your credit report because your credit report will show that all your credit card debt has been paid off. 

What is a Home Equity Consolidation Loan? 

If you are a home owner and you have equity in your home, you could qualify for a home equity loan, which will allow you to clear your credit card debt by using a low-interest loan. A home equity loan is a loan that uses your house as collateral.

A home equity consolidation loan is possible only if you have adequate equity in your home. In tough economic times, this is not always an option. 

If you are drowning in credit card debt, there are plenty of options that will allow you to refinance your credit card debt. As a result, both the size of your monthly payment and your interest rate will decline.

 


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