Archive for September, 2009

Credit Cards Debt Consolidation

September 13th, 2009

If you are one among millions of Americans who have a dozen or so credit cards all used up, then you know you have a chronic debt management problem.  For so long, credit has been so easy to get. Now, with a severe credit crunch that has messed up the economy and brought hundreds of companies to their knees, you get to start rethinking your way of life.  Maintaining your debt-ridden lifestyle through oodles of credit needs to end.  You won’t get rid of debt entirely.  But you need to put a more fiscal debt management to reign in on your lifestyle.

On the Road to Recovery

This will take time.  Accumulating credit card debts over the years won’t end in a matter of days, unless you won the lotto or got a windfall inheritance from some unheard-of relative.  You need to plan this through.  One popular option is to go into credit cards debt consolidation.

Consolidating your debts when you have so many from various creditors is often a wise thing to do to kick of any debt reduction effort. But only if you satisfy these conditions:

  • The consolidation loan carries a smaller interest rate than that of any of your credit cards.  This is the only way to make sense out of this option.  You can then reap some savings from debt servicing just one lender.

 

  • Majority of your credit cards’ outstanding balances are transferred or assumed by the new consolidation loan so that you reduce the number of your creditors and simplify your payment schedules accordingly.

 

  • Don’t repeat your spending habits that brought you to your credit card woes.

 

The last is perhaps the most important consideration when you consolidate credit cards debt.   Bear in mind that after paying off the balances on your credit cards, you effectively have a new credit line.  The temptation to splurge rears itself anew and unless you can reign-in on your compulsion to spend,  not only could you end up in the same predicament when you started, it could be worst, since you now have a consolidated loan to pay off on top of those credit card balances.

Self-discipline is Key

Some effort in reducing your credit cards can be rewarding.  Try to rationalize the number of credit cards you have.  Retain only one or two for your groceries, utility bills and another reserved for emergency use.  Surrender the rest to their respective issuers.  This might take some courage but minimizing the temptation to spend that comes with having so many credit cards will definitely be a concrete step to debt relief.

Otherwise, and this may be true for most Americans, you may need to seek professional help in debt management. There are debt counselors out there that can help you for a fee.  This is no different from getting psychiatric help but you can look at as in investment in getting trained to be on your own eventually.  If you can’t do it for now, get someone to do it for you. This is debt counseling which should go hand-in-glove with any effort at debt reduction and consolidating credit cards debt.

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