How to consolidate and pay off credit card bills

If you are having problems managing your credit card bills and your accounts have been handed over to a collection agency, you can try consolidating your debts. Consolidating credit card helps you to pay off your debts more easily because all the debts are consolidated into a single debt and lowers the interest rate on your debt.

Ways to consolidate credit card debt

There are various ways that you can consolidate your credit card debt. They are as follows:

1. Get a home equity loan – You can take out a low interest home equity loan and try to pay off your credit card bills. This loan is taken against the equity that has built up on your home. The interest rate on HELOC is generally low, which will make it easier to pay down the loan.
2. Get a personal loan – You can try to get a personal loan from your bank to pay off your credit card bills. However, personal loans generally charge high interest rates. So, you need to have a really good credit score to qualify for a personal loan with a comparatively low interest rate.
3. Do a balance transfer – You can transfer the balances from all your high interest credit cards to one with a low interest rate. Thus, all your bills are consolidated into a single obligation. If you don't have a low interest credit card but you have good credit score, you can transfer the balances from all your cards into a new card that offers a 0% interest rate. However, you should try to pay off the debt within this 0% offer period. The offer period generally lasts for 6 months to one year, depending on the credit card company. Most companies also charge a balance transfer fee for each account you transfer. So be careful when doing a balance transfer or you might end up in more debt.
4. Enroll in debt consolidation program – If you can't consolidate your credit card bills on your own, you can get help from a credit or debt management company. The agency will first analyze your financial situation and then enroll you into a debt consolidation program, if needed. During the debt consolidation program the counselor negotiates with your creditors to lower your monthly payments by reducing or eliminating your interest and late fees.

Advantages of credit card debt consolidation

There are many advantages to credit card debt consolidation. They are:

1. Several debts are consolidated into one – When you have several debts, it becomes really complicated, as you are required to make several payments each month. However, when all your debts are consolidated into one, you are required to make a single monthly payment toward that single debt.
2. Interest rate lowered – With debt consolidation, the interest rate is lowered and therefore it becomes much easier for you to make the regular monthly payments. You are relieved from the stress of making high monthly payments.
3. Credit is not hurt – Unlike debt settlement, with debt consolidation, you repay the entire amount of your debt, instead of part of it. Therefore, your credit is not hurt.

Disadvantages of credit consolidation

Credit card consolidation helps you to pay off your credit cards bills easily enough. However, there are some disadvantages to it:

1. Risk to your asset – If you take out secured loans there is a risk of losing your assets. If you fail to pay back the debt, your assets may be seized. For example, if you get a HELOC to pay off your credit card bills and then you fail to pay back the debt, your home may get foreclosed on.
2. Accumulate more debt – You can end up accumulating more debt through debt consolidation because you take out new loan to pay off your credit card bills. Also, if you do a balance transfer, theinterest rate on the new credit card can increase, thereby increasing your outstanding debt amount.
3. You can end up paying more in interest – If you make low monthly payments while in a consolidation program, you end up paying more toward the interest, as you are taking a longer time to pay off your debt.
4. Scam credit consolidation companies – The credit consolidation company you are trusting to help you get out of debt could be running a scam. Thus, it is important to check the authenticity of the company.

However, there are various other ways that you can try managing your credit card debt, like debt settlement, negotiating repayment plans, etc. For more details refer http://www.creditmagic.org/card/debt-management.html .