Obtaining a credit card induces a feeling of privilege in you which cannot exactly be put into words. Your financial condition, however, may become unfavorable, and managing that very card may become a nightmare under such circumstances.
If you are stuck in a position of having less money with the bank(s) on your trail to get back their money, what is the way out? Learn about consolidation here because the amount of monetary difference it makes is substantial (to a certain degree), and the legal time period it buys you is worth the effort. The following are ways you can consolidate your credit card debt:
Table of Contents
1. Balance Transfer
This applies to the situation where you may have more than one credit card and you are on the brink of default. Sometimes banks offer you the option of choosing one bank among the many you may be customers of, get all of your negative balance transferred to one particular card and pay it all off in one sweep.
This transfer’s benefit can be understood by the fact that, to a specific point, you have the option of choosing the bank which offers the lowest interest rates, so instead of accumulating debt on different cards with various interest rates to pay off, you simply manage one. Beware, however, that in the event that you are unable to complete the payment by the given time, the penalty on your defaulter status can be devastating.
2. Loan Financing
The debt trap is a phenomenon which can be very perturbing for customers, but the concept exists mainly because you get a way out with less overall money and hassle on your plate. Debt financing through loans basically means that you go to a financial institution, which can also include the bank you are indebted to, and ask for a loan solely for the purpose of bringing the credit card balance up to zero.
The first benefit of this action is the increased time you get to pay back the new loan. Secondly, depending on how well you present your case and how convincing the figures are. The overall interest rate you become subjected to in the near future can be lesser.
3. Debt Management Plan
This may be the most sought-after plan especially for employees of firms who have taken loans from their own organizations. With the plan they offer you (usually constituting 3-5 years), you have the benefit of the added time,benefit of having an understanding with the institution you are indebted to, and of course, benefit of manageable interest rates.
During the repayment period, however, you will have your credit card privileges revoked, and you will not be able to use them.
Conclusion: What about the Credit Score?
It is natural to understand the overall negative impact such steps will have on your credit score. When you revolve your debt, get your time slot increased using external means, or use any form of consolidation. Credit scores do dip, but the impact can be negated as long as the consolidation acts as your platform of bouncing back up.
