Do you want to know The Best Way To Consolidate Debt Without Hurting Debt? There are some situations in life that are never avoidable. I am very certain that every single person reading this article must have encountered debt in one way or the other.
Getting into debt may not be the biggest issue, getting into debts that you aren‘t sure of paying back is a more serious issue. Therefore it is very important that we all know the best ways to consolidate debt without hurting our credit.
The Best Way To Consolidate Debt Without Hurting Debt
You will agree with me that debt consolidation seems to be the best answer if you have gotten into streams of debts that you can‘t payback. As good as it sounds, it can be a very big drawback to your credit and your credit score.
Now, if you must consolidate your loans, you must know how to do it properly in a way that won‘t bring a more adverse effect to you and your finances. Keep reading to get the tips from us.
Consolidate Debt | Consolidate Debt Loans
Now, what does it mean to consolidate debt? It may not sound like a good idea to take loans to pay off debt, but if one loan could clear up all your debts. Yes, that is the concept of debt consolidation. Debt consolidation means taking one loan to pay of many debts altogether. It sure sounds like a good idea, but the fact is that you are getting into more debt.
On the brighter side, debt consolidation usually comes with lighter and better terms for loans. Sometimes it will give you more time to pay back your loans with better interest rates.
Consolidate Debt With Credit Card
One other option for consolidating debts is using credit cards. You can consolidate all your debts in the balance of a single credit card. This process could give you better terms and simplify your payback process. With this feature, you can even choose the amount you will be able to pay back each month.
Using a transfer card to consolidate debt
with a balance transfer, you can move what you owe on one credit card to another credit card with better terms. This option could give your more time to pay back your debts at lower or reduced interest rates.
What Are The Advantages And Disadvantages Of Balance Transfer Cards
Below are the pros and cons of using balance transfer cards;
- You can pay all your debts in one place
- With transfer cards, you can make one payment per month
- With this process, you can make your debt more manageable
- The transfer cards give you less interest on loans
- Finally, your crediting rate could improve
- You will require transfer fees
- The limit here is based on your credit score
- After the interest-free offer, you get a high-interest rate
- If you miss a payment, you could get a penalty
- If you use the card for spending. You may attract a high-interest rate.
These are the advantages and disadvantages of using balance transfers to consolidate your loans.
How Debt Consolidation Affects Your Credit
Debt consolidation can affect your credit either affect your credit positively or negatively. Considering the following factors
- A hard inquiry is performed which may lower your credit score by ten points
- Credit utilization may decrease your credit score. A credit utilization ratio is calculated which is gotten by dividing the total balance on your credit card by your total credit limit.
- The record of your closed accounts may hurt your credit score
The Best Way to Consolidate Debts
To effectively consolidate your debts, follow the steps below
- Create a list of all your debts, loans, and credit cards. Let this list include the total balance, your interest rates, minimum monthly payment, and total remaining payments.
- Decide on what type of debt consolidation will be best for you, whether it is a personal loan, home equity loan, etc
- Apply for them within a span of two weeks to avoid getting hard inquiries on your credit reports
- Once you have gotten all your offers, use the debt consolidation calculator to know which particular lender you should go for.
Debt consolidation isn‘t a bad idea if you want to get out of debts easily. The most important thing to attack is the lifestyle choices that brought you into multiple debts in the first place. Further research can be done on Google.