Comments on: Should I pay off my credit card debt with a loan? http://howto-howto.info/credit-card-debt/should-i-pay-off-my-credit-card-debt-with-a-loan/ How To Get Out Of Debt Sat, 04 Jun 2011 12:01:18 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Dr. Dan http://howto-howto.info/credit-card-debt/should-i-pay-off-my-credit-card-debt-with-a-loan/comment-page-1/#comment-2509 Dr. Dan Mon, 23 Nov 2009 00:01:36 +0000 http://howto-howto.info/credit-card-debt/should-i-pay-off-my-credit-card-debt-with-a-loan/#comment-2509 Debt consolidation loans, when available, often have interest rates that are dramatically lower than credit card interest rates (This is in large part due to the fact that credit card interest rates tend to be so high). If you're going to bother with a consolidation loan, the interest rate should be lower than the credit card rates. The process--and what may be available--however, varies from bank to bank. You should talk to your bank, and see what options they have. Some offer loans. Some offer a new, low-interest credit card for balance transferal. The latter can be sticky. Some banks even have investment and/or credit counselors, which can be a good resource. If you have more than one bank, shop around. If you happen to belong to a credit union, they often have better deals for their members than regular banks have for their customers. It's important to note that when people clear their credit card balances, they often use that as an excuse to spend more--even if they still have the debt. If you avoid this pitfall, a debt consolidation loan with a lower interest rate can be a good way to save money in the long run. Obviously, you should be paying more than the minimum due if at all possible (regardless of whether you're paying to the cards or paying off a loan to consolidate the debt), as much of that goes towards interest. If you don't end up going the loan route, you can (should) try asking the credit card companies to lower the interest rate on your cards. They may say no, but it never hurts to ask, and can save a considerable amount where large amounts of debt are concerned. Another tip to reduce debt is to pay more frequently--even if you're ultimately paying the same amount. Credit card interest compounds daily, so paying half of your payment at the middle of the month and half at the end of the month is more effective than paying the entire thing at the end of the month. If you can pay 1/4 (or more) weekly, that's even better. There are also a number of tricks to paying down balances. Paying down the highest interest debt is the most optimal, but if you need a psychological boost, you can use the debt-snowball method, which puts extra money towards the smallest balance first, paying off an entire card as early as possible, and then rolling the money you were paying towards that card into the next smallest balance. This, while not optimal, can be very helpful for people who feel mired in debt. Debt consolidation loans, when available, often have interest rates that are dramatically lower than credit card interest rates (This is in large part due to the fact that credit card interest rates tend to be so high). If you’re going to bother with a consolidation loan, the interest rate should be lower than the credit card rates.

The process–and what may be available–however, varies from bank to bank. You should talk to your bank, and see what options they have. Some offer loans. Some offer a new, low-interest credit card for balance transferal. The latter can be sticky. Some banks even have investment and/or credit counselors, which can be a good resource. If you have more than one bank, shop around. If you happen to belong to a credit union, they often have better deals for their members than regular banks have for their customers.

It’s important to note that when people clear their credit card balances, they often use that as an excuse to spend more–even if they still have the debt. If you avoid this pitfall, a debt consolidation loan with a lower interest rate can be a good way to save money in the long run. Obviously, you should be paying more than the minimum due if at all possible (regardless of whether you’re paying to the cards or paying off a loan to consolidate the debt), as much of that goes towards interest.

If you don’t end up going the loan route, you can (should) try asking the credit card companies to lower the interest rate on your cards. They may say no, but it never hurts to ask, and can save a considerable amount where large amounts of debt are concerned.

Another tip to reduce debt is to pay more frequently–even if you’re ultimately paying the same amount. Credit card interest compounds daily, so paying half of your payment at the middle of the month and half at the end of the month is more effective than paying the entire thing at the end of the month. If you can pay 1/4 (or more) weekly, that’s even better.

There are also a number of tricks to paying down balances. Paying down the highest interest debt is the most optimal, but if you need a psychological boost, you can use the debt-snowball method, which puts extra money towards the smallest balance first, paying off an entire card as early as possible, and then rolling the money you were paying towards that card into the next smallest balance. This, while not optimal, can be very helpful for people who feel mired in debt.

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