Consumer Debt Consolidation

Consumer debt is defined as the debt that was used to fund consumption rather than in investment. It is mostly related to credit card debt and is often at higher interest rates than any other kind of loans. This is because this doesn’t have any specific pay-off deadline. And considering the economic climate, the interest rates being applied on existing credit card debt are astronomical.

One good thing that the current economic condition has brought is that consumers are now wiser when it comes to their loans. Credit debt consolidation are now being considered by more people than, say, two years ago. This is because credit debt consolidation gets rid of high finance charges that eat up the monthly minimum payment.

The basic idea is in credit debt consolidation is to move balances on higher interest credit cards into an existing credit card account that carries the lowest APR. This allows consumers to pay down the principal on their outstanding balances instead of just paying off finance charges with hardly making any difference on the loan itself.

Reviewing your existing accounts’ interest rates is the key to managing your credit card debt. Just imaging having a high balance on high interest rate account, you will likely to end up practically paying off these balances for the rest of your life. Remember that minimum payments are usually allocated to pay off accrued interest, thus doing very little to reduce the actual debt.

Taking Advantage of Consumer Debt Consolidation

Now, if you want to maximize the advantage of consumer debt consolidation, you can call your credit card companies and ask for any promotional offers they may have available for you. Then, compare terms and decision and go for the one with the best deal. Who knows, you may be able to get an increase to your credit line allowing you to transfer as much balance as possible at a 0% promotional rate for up to 18 months.

Should you go this route, remember that payment allocations are from higher interest rate to lower. So, if you are to do a consumer debt consolidation, do not use that credit card account for your purchases. Otherwise, you will just waste the promotion by not paying it off before the offer expires. Consumer debt consolidation is a smart move, but it will take a smarter move to take full advantage of this opportunity.

If you can’t find a good deal with your credit card company, you can consider other consumer debt consolidation options like using a home equity loan to pay off all your existing credit card loans. The idea is basically the same as consolidating your debt with another credit card company. The only difference is your home is at stake if you were to take out a home equity loan. But discipline is all you need in paying this off in no time.

Financial institutions offering is consumer debt consolidation is one of the best thing that this economic turmoil has brought us. They offer this option not just to help out consumes but also for them to earn their business.

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