Implications Of A Debt Consolidation Program On My Credit Cards
When in financial stress, everything gets negatively impacted right from your eating habits, your sleep, to your personal relationships. Obviously, your sole intention, at this point in time, is to move forward and get out of this messy situation. If you opt for an effective debt consolidation program, you are on the road to a perfect solution for your debt issues. However, debt consolidation implies that you need to give up your credit cards and this could pose a major problem for you. However, even though it may seem quite frightening or really challenging at first to give up your credit cards, it is actually possible for you to lead a life without relying on credit cards at all.
Debt Consolidation Program for Your Credit Card Debts
Debt consolidation programs generally are effective and safe solutions for all those people who have issues with their credit card debts. The primary objective of a debt consolidation program is refinancing your debt by:
- Lowering the interest rate
- Reducing the monthly payments
- Making only a single monthly payment.
Only one single monthly payment actually was cited as the main reason for debt consolidation in U.S. News Survey in 2018. An effective debt consolidation program would be eliminating the stress and anxiety that come from tackling multiple credit card debts and keeping track of multiple payment deadlines.
The most difficult question about consolidation of debts is whether to consider doing it with a loan or without a loan. However, the conventional form of debt consolidation involves combining multiple credit card debts and rolling them into one larger loan that is taken out for paying off the smaller loans. As you are now having just one simple loan, you need to make just a single monthly payment that should be simplifying the entire bill-paying process.
As per https://www.forbes.com, “You can consolidate your credit card debt with a credit card consolidation loan, which is also known as a personal loan. With a personal loan, you can consolidate your existing credit card debt into an unsecured personal loan that is typically repayable in 2-7 years. Personal loans range from $1,000-$100,000 depending on the lender.”
We know that credit card debt seems to be variable interest debt that implies that the interest rate may change. On the other hand, a debt consolidation loan is supposed to offer a fixed rate of interest so that you would be required to pay the same fixed amount month after month without any changes or variations.
We know the debt consolidation with a personal loan could offer a relatively lower rate of interest as compared to your present interest rate offered by your credit card. Therefore, debt consolidation by taking out a personal loan could be a fantastic strategy for saving substantial interest costs. For instance, if we assume that you are having $20,000 worth credit card debt and you need to pay 17% interest rate along with $400 monthly tests. If you are having a robust credit profile, then maybe you could consolidate your credit card debts using a personal loan at 7 percent rate of interest and loan repayment term equal to 3 years, you would end up saving $12,568 and successfully pay off all your credit card debts much earlier.
Debt Consolidation Program & Credit Cards Do Not Gel Together
The moment you end up signing up for a specific debt consolidation program, you must necessarily give up all your credit cards and other credit sources. The cards are actually destroyed by you and that could prove to be quite empowering for you just like many others. The credit card companies would be compelled to cancel your credit cards and restrict further use. At this juncture, you must be petrified as you simply cannot imagine a life without credit cards. Visit https://www.nationaldebtreliefprograms.com, for perfect debt solutions.
The fact remains that a majority of the people in financial distress have either reached or exceeded all their credit limits by the time they consider going on a Debt Consolidation Program, so anyways they were forced by circumstances to live without credit cards. The main difference now would be the fact that you are actually working toward a perfect solution.
Saving On Over-Limit Fees
Many people meet credit counselors looking for an appropriate debt consolidation program. They do not seem to have any more credit for use on their specific accounts. But unfortunately, every month one credit company or the other would be charging them what is referred to as the ‘over-limit fee’ amounting to almost $29. This is an additional fee on top of the usual monthly interest charges. Once you opt for a Debt Consolidation Program, and if it is noted and accepted by all your creditors, you would no longer be asked to pay an over-limit fee. That should at once boost your overall repayment ability.
Free From Collection Calls
When your creditors come to an agreement that they would be accepting the outstanding payments via Debt Consolidation Program, your account would be eliminated from the active queue of the debt collectors and at once, all debt collection calls would stop coming and bothering you.
Quicker Boost in Credit Score
Carrying any balance at or close to your credit limit would be adversely affecting your credit score. It would be really difficult to boost your credit score until the balance is brought down. If you pay off the balance via a Debt Consolidation Program, you could start rebuilding your credit incredibly fast.
May Use Secured or Prepaid Credit Cards
There could be occasions when you would need to use your credit card, as cash would be of no use like while booking a hotel, renting a car, or making online purchases. Remember for such occasions, you have access to traditional credit card alternatives. For instance, you may use a secured or prepaid credit card. These types of credit cards are actually loaded with the money you currently have as such, there is no risk of getting trapped in debts again simply because you are not required to borrow any amount. In fact, you are simply using the money that is your own.
It could be slightly frightening to not have your own credit cards with you. You could still survive without credit cards. You may consider creating an effective emergency fund or savings plan for occasional additional expenses, you would be having cash available to you. In such situations, you do not need to rely on credit and get further trapped in never-ending credit card debts. Remember you would feel the joy or exhilaration when you are free from debts at Debt Consolidation Program.