Consolidating credit card debt good idea
For example, let's assume that you have ,000 of credit card debt at a 19% interest rate and make a 0 monthly payment.
With a strong credit profile, if you can consolidate your credit card debt with a personal loan at a 7% interest rate and three-year repayment term, you will save ,634 and pay off your credit card debt earlier.
Secured loans tend to have lower interest rates than credit cards, but the big risk is that you could lose your house or car if you can't make the payments. You've probably gotten one of these offers in the mail -- a credit card with a 0 percent introductory rate that lets you transfer balances from other credit cards.
In contrast, a personal loan is a fixed interest loan, so you pay the same, fixed amount each month regardless of changes in interest rates, which is more predictable.
Even if you are approved for a loan, the interest rate might be similar to what you're paying on your credit cards.
The debt consolidation option you choose should help you pay down debt while staying within your budget.
You also have to be careful not to fall back into old habits. Close your newest cards, Bovee says, and be careful with your future credit spending.
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There are several options for making that happen -- a debt consolidation loan, a personal loan, a balance transfer on a credit card, a home equity loan or borrowing money from friends or family.