If you currently have more than one credit card and all you can do is make minimum payments on those bills, you should consider consolidating your debt. Other telltale signs: taking regular cash advances from one card to pay another; putting off expenses because you don't have the cash to pay them; and constant worry about debt. In almost all cases, credit-counseling agencies can work with creditors to set up a payment-reduction plan.
What are the benefits of consolidating debt through a bank loan?
Stability, for one. Even though the interest rate on a bank loan might be higher than promotional APRs from a credit card company, receiving a fixed-rate bank loan for debt consolidation means that, provided you make payments on time, you'll be paying the same interest rate for the life of the loan. Remember that replacing short-term high rate debt with long-term lower rate debt may result in you paying the same amount in finance charges on the debt over the life of the longer loan. Borrowing from your bank also strengthens your relationship; if you need another loan and you have a good track record, the bank will be more willing to help.
How should I handle debt after I consolidate?
Unfortunately, many borrowers interpret a payment-reduction plan as a license to take on more non-mortgage debt; a few years after consolidating, these people look to consolidate again. One way to approach debt after consolidation is to use the money saved through payment-reduction to accelerate pay-down on outstanding loans. This will eliminate debt faster and may also work to raise sagging credit scores.
Source: mortgage.com
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