A: Credit cards
Today, the American appetite for credit cards remains uncurbed by debt. In fact, earlier this year, total revolving debt in the U.S. topped more than $887 billion, according to the Federal Reserve – and it shows no signs of being in the black anytime soon.
For many, debt is a suffocating, scary, overwhelming, frustrating four-letter word that’s ultimately toxic enough to bring even the strongest of people to their proverbial financial knees. But, it doesn’t always have to be that way – debt shouldn’t be a monster you fear. For those looking for a solution, a debt consolidation loan may help ease your frustration and provide the peace of mind you’ve been looking for.
What Is Debt Consolidation?
“Debt consolidation is a way for you to take your high-interest credit card debt and combine it into one monthly payment,” says Quizzle.com credit expert Katie Bushor. “But, be sure to read the fine print, as sometimes there are changes to your term, which may leave you paying more in the long run.”
There are two ways to consolidate debt, balance transfers and personal loans. If you’re paying on multiple credit cards and only making the minimum payments each month, your interest is going to add up in the blink of an eye. Typically, consolidating your high-interest debt with a balance transfer or personal loan allows you to make one monthly payment, save money in interest and pay off your debts in a shorter amount of time.
What Should You Do If You Want to Apply for a Debt Consolidation Loan?
Check Your Credit
When you apply for a balance transfer or personal loan, your lender/creditor is going to check your credit report and score, so it’s a good idea to be familiar with both. Your credit helps determine the interest rate you receive on your loan. The better your credit, the higher your chances of securing the best rate.
As a consumer, you have the right to dispute any inaccuracies on your credit report. If there’s inaccurate information or something you don’t recognize on your credit report, such as a new account or late payment, dispute it with the credit reporting companies (Equifax, Experian, TransUnion). Ultimately, inaccurate information on your report may be holding you back from a better interest rate.
Pay Your Bills on Time, Every Time
Paying your bills on time, every time will help your credit. Even if you can only make the minimum payments, it’s extremely important that you make your payments on time.
Is debt consolidation right for you?
Debt consolidation isn’t right for everyone. Study up and map out your financial situation to see if a debt consolidation loan will work for you. There are many companies who offer balance transfers and personal loans, so research them to determine your best fit. You’ll also want to be sure to read the fine print – there may be fees attached to the loan you that you didn’t know about. And remember, if an offer sounds too good to be true, it probably is.
“No matter which road you choose, you need to make sure you have a game plan for how you’re going to get out of debt. You need to know where your money is going each month and make a plan to get your debt paid off in a reasonable time, while still saving for your rainy day fund,” says Katie. Common sense is your best defense.
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