Credit Card Debt Consolidation
One of the biggest problems facing Americans today is high debt. Credit cards, bank loans, mortgages, and car loans - you name it. If there is a person in need of money, there is a lender willing to lend it. Although loans can prove to be a tremendous help in many situations, they can also end up ruining lives if not handled properly.
Time after time, many people find themselves overwhelmed by debt due to the never-ending cycle of interest rates and monthly payments. For instance, credit card debt has destroyed the credit of hundreds of thousands of people in America. Luckily, there are numerous solutions to limiting the risks of credit card debt disasters. One of them being credit card debt consolidation.
Credit cards are a very convenient, tempting commodity, but can also be very dangerous if not used properly. Many people, especially students, view credit cards as a quick and easy way to finance a better quality of life, or, simply use credit cards because they are so far behind financially already that they need the extra invisible income. Interest rates, monthly payments, and potentially bad credit are serious hazards involved with credit cards and can easily spiral out of control if the user isn't careful.
One of the most important factors to consider when looking into any credit card or loan is the interest rate. The interest rate is the amount per year the lender charges the borrower for the loan. For example, if you were to borrow $1,000 from a credit card company at an average interest rate of 18 percent, then you would be paying $180 a year, just to borrow their money. Many people overlook the importance of the interest rates, and quickly find themselves knee deep in a pile of debt, that is continuing to grow.
Consolidation: The Solution For Credit Card Debt
Let's use another example to understand credit card consolidation. You own 3 credit cards; have a balance of $3,000 on each, and each card holds and annual interest rate of 18 percent. Over one year, combining all the balances together, you will be paying almost $2,000 in interest. Now, if you took out a consolidation loan, consolidates all the high interest balances to a loan with, let's say even 7.5 percent, you first year you will only be paying $675 in interest. In this situation it may not seem like much, but if you are deeply in debt, saving a few hundred in interest can mean a lot.
A consolidation loan allows you to combine all of your credit card bills into one, at a lower interest rate. This means that rather than paying several different bills, with several different interest rates for several different credit card companies, you would only have to make one lower interest rate loan.
It is very easy to fall into the kind of debt that can begin to consume your day-to-day life. It is important to realize that there should be no shame in going into debt, and that it is a perfectly normal thing. Making sure you know the facts of debt, credit, and debt management can be the deciding factor in whether or not you are using credit to your advantage, or rather it's using you.