How to consolidate credit card debts
Consolidating credit card debt means obtaining a new loan . Although we pay any debt that we have pending, we do not stop being indebted. However, card credits carry the highest interests of the entire market . That is, if we want to get rid of credit card to avoid higher interest, we can apply for a personal loan and thus get rid of the debt.
Another alternative to personal loans, is the consolidation of debts by credit card. This means that a negotiation is carried out with the entity in which you have your debts, in order to reunify them in a single monthly payment . If you have one or several cards with debts for credit, you can simplify payments in a single monthly fee. This does not exempt in any case the payment of the different debts .
HOW TO CONSOLIDATE CREDIT CARD DEBTS?
Before hiring a debt consolidation loan, a series of steps must be followed:
- Keep accounts of your expenses: to be able to settle debts, you have to know two things. First, why have you contracted them? And then, control the amount of money that we enter monthly and what we spend. The expenses can never be greater than the income. If this happens, the debts will not be solved, but they will increase.
- Budget plan: it consists in adjusting the monthly expenses to counteract the debt, until it is completely liquidated.
- Negotiations with the entity: many of these operations require that an agreement be reached with the entity in order to reduce payments, interest, extend the return period, etc.
ADVANTAGES AND DISADVANTAGES OF THE CONSOLIDATION OF CREDIT DEBTS
A consolidation of the credit debts gives you a series of benefits, but we must also remember that every operation carries risks.
- First, this allows you to have the same monthly fee . This way you can better organize your income and allocate the part you need to pay your debts.
- The interest that is paid -as we have already mentioned- is much lower than what a personal loan offers you.
- The previous point will be reflected in the amount that you have to return to your entity . This will prevent you from contracting more debts.
- When transferring outstanding balances between cards to group them, an increase in the fees for such transfers will apply.
- The new purchases made with the card in which the credit debts have been consolidated, will imply more interest on said card. For this reason, it is not advisable to collect the debts that we already had, with new ones.
- In case the consolidation of debts was due to the non-payment of a mortgage, we may be endangering the home . This would not happen if there was a personal loan or a debt with a credit card.
- In the event that the repayment term of the consolidated credit is exceeded , the interest that will be applied will be much higher than in the case of a credit card.
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