Almost all banks and credit unions have a credit card debt
consolidation program that can offer a much lower overall interest
rate. But remember that this is an unsecured loan and not a
mortgage or car loan. Mortgage and car loans are at an all time
low since many are tied to the Prime Lending Rate. The Prime
Lending Rate has dropped to 3.75, mortgage rates can be below 5%,
and car notes can be 0%.
Although unsecured rates are still hovering around 11-12%, this
is a major improvement over some of the credit card rates of up to
28%. These numbers are based on someone who has a reasonable
credit score and the ability to pay back the loan. Depending on
your credit score, you might get a slightly better or worse
interest rate.
Check your local banks and credit unions for the best rates on
unsecured loans or they may even call it a credit card debt
consolidation loan. Many have special offers that can offer more
benefits. You can also get better deals if you agree to an
automatic payment from your bank account, or open up a new savings
account.
Credit Unions might be a good option since they are member
based and regional. Most of their income is derived from local
operations and can be more flexible. You can also start off small,
say with your highest interest rate card, and establish your
credit worthiness with a short payoff time period.
Work with your bank or credit union on building up your credit
by borrowing a smaller amount and paying it off quickly. Draw up a
plan listing your credit cards, interest rates, and amounts owed.
Even if you have to take one credit card account at a time, it
will be a start.
Once you pay off a credit card you may not want to close the
account right away. Don't charge on the card, you don't want to
fall back into the same situation again. But if you close 5
accounts, even if you pay off the debt, it can impact your credit
score. Close them down over a period of time, maybe one per year.
Most people really don't need more than one or two credit cards
anyway.
And it's always a good idea to take time and develop a budget
to keep your spending under control. Put your credit cards away in
a drawer or safe pace. Don't carry them with you, if you have to
pay cash you'll be much more aware of the money you are
spending.
Impulse buying, even on a small scale can run up huge debts. A
$10 purchase seems trivial until you add up 25 at once. That's
what happens to many people, small purchases that are made
frequently can turn that credit card debt into a monster. If
you pay in cash, you see the money and realize the cost.
It takes a little discipline and planning but anyone can change
their spending habits. Small amounts add up. Instead of stopping
for that high dollar cup of coffee, bring one from home or wait
until you get to work. That $6 a day expense is $120 per month.
That's a good chunk of money to save or use to pay off your debt.
The trick with credit card debt consolidation is to not fall
back into the same spending patterns that created the debt in the
first place. You need to change your attitude and watch the small
purchases. A good way to see exactly what you are spending on
credit is to keep a daily total of each charge. Set a limit
according to what you can pay each month and that way you won't
fall back into the same problem down the road.
