Are your mornings clouded by the fear of opening your mailbox and finding another bill or defaulter’s notice? Managing your finances can be tough if you have just started a family or in case you are trying to upgrade your lifestyle. Millions of Americans are struggling each day with unpaid bills and credit card debts that are brought about by an uncontrolled urge to spend.
Who is to be blamed?
When it comes to spending habits and surmounting debts, behavior is more at fault than math. We all know by now that high school does not teach us to manage accounts or calculate our taxes. But it does teach us to love a luxurious lifestyle that comes within our reach as soon as we get our own credit cards.
Most credit card companies love issuing high limit credit cards. Once you start spending more than you can pay, the interest rates become the immediate fiend. We have seen credit card companies charge as much as 20% interest rate. It is the enabling behavior of the credit card companies that are mostly responsible for the deplorable financial status most credit card users find themselves in after every Christmas, New Years, Valentine’s Day and end of season sales at brand stores.
What is a 0% balance transfer credit card?
This sounds like a dream come true for many shopaholics and big-time spenders who have maxed out all their credit cards and are struggling each day to pay their debts. This is the type of credit card that promises you a 0% interest rate for a period of 12 – 18 months. You can also transfer all your other credit card balances and debts to this card, usually for a 2% – 3% fee.
But here are the cons that should keep you from getting a 0% balance transfer credit card for yourself –
- If you fail to pay your debt within the promotional period (which is almost always), you will need to opt for other viable balance transfer options and those are not at all friendly towards your financial records.
- Inability to pay the credit card debts directly dents your credit record and you may even be forced to declare bankruptcy if you cannot manage to pay your debts in time.
- It just moves your debt around from one place to another and charges you a transaction fee for the same. This quickly adds up to a larger debt and pushes your credit utilization ratio.
Why are debt consolidation loans the ultimate saviors?
Each day we find hundreds of credit card users looking for a better way to consolidate their debts. Among them are 0% balance transfer credit card users who are riddled by debilitating interest rates on their extrapolating debts. Almost all of them look for a better option that can take care of their current debts and lower the interest rates at the same time.
In such cases, we almost always suggest a debt consolidation loan. This is a reconciliation loan that helps you to merge all your existing debts into one. The interest rates are almost always lower than what you are paying for the multiple loans and credit cards every month. The smaller interests and longer terms of payment make the payment process much smoother for those on a fixed income.
What are the obvious advantages of debt consolidation loans?
This is a personal loan, so the banks or credit unions that are sanctioning the loans require no explanation or expenditure record for the amount. The money can be used for all personal purposes including paying off other loans, debts and bills.
Debt reconciliation loans are mostly of the unsecured kind. You do not need to use your home, car or other assets as a leverage to get the loan sanctioned from your bank or credit union.
In most cases, a fairly good credit score is enough to get a personal consolidation loan of this kind. Any credit score above 600 is qualifying for most of the unions and organizations.
There are mushrooming online lenders who are willing to help out the ones with dinged credit records in exchange of a decently generous interest rate.
A debt consolidation loan can also help you with your credit card score. It moves the entire credit card debt to the installment loan column leaving your credit score blemish-free. Once your credit card debts are paid off using the consolidation loan money your credit cards are freed up and you credit score sees brighter days.
If you are one of the many who struggle with regular bill payments simply because there are too many payments each month to take care of, you should definitely try consolidating your bill payments into one. This makes sure you never miss a payment and you do not have to pay hefty penalties or defaulters fees in the long run.
What’s the reality?
Debt consolidation is an option that over a million credit card users are opting for, each year, in the USA. This is the easiest way out of multiple, high interest debts into a single, low interest, manageable one.
But as you can already understand, debt consolidation is not a solution to your financial turmoil. This is just the transition from one kind of debt to another one. It is impossible to scrounge your way into financial freedom. And even though these forms of loans are almost always unsecured, it is impossible to get away without paying your lenders back in time.
You should only opt for a debt consolidation loan if you are planning to use them as a part of a larger plan. You need to sit down and analyze your payment patterns. As we have said before, a debt is a result of spending behavior rather than the lack of astute financial knowledge. So you should go for reconciliation of your debts and bills only if you are planning on getting your credit card use and spending habits in check.