Recently, there’s been an increase in credit card debt! Every average U.S household today carries as much as $15,762 credit card debt. And it’s not just families and individual users who are in credit card debt. The group also comprises of entrepreneurs and business owners who wish to become millionaires with their business success. Every business has expenses when it comes to business expansion, which at times leads in credit card debts. However, one of the best ways to get out of a credit card loop is opting in for a debt consolidation loan.
Debt consolidations that can help you
Are you planning to opt-in for a debt consolidation loan? If yes, then you can utilize the loan proceeds to clear off the payments that you owe to the creditors. When your debt gets consolidated into a single loan, you are entitled to get many benefits. The three important ones are as follows:
Your rate of interest is low
When your interest rate is small, it can lift off many years off the debt repayment. It can hugely add to your savings as well. You also need to make sure that your APR (Annual Percentage Rate) on the new loan is lesser than the one in your existing debt.
Your credit score increases
When an entrepreneur has reached the maximum limit of his credit card, the utilization ratio is going to be drastically high. However, this ratio can also hurt the credit score as well. When you repay the credit cards using a loan, you can minimize the use in your credit card. Based on recent studies, entrepreneurs who resorted to loan for paying off the credit card debts witnessed an increase in their average score of as much as 21 points in just about three months of their taking the loan. Hence, one of the smartest ways to enhance your credit score is to do gradually remove the burden of credit card debt entirely.
The payment method is simpler and easier
When you incur debts across several credit cards, managing the accounts might become a stress for you. However, when you opt in for a consolidation loan, you have to make one single payment. This advantage often gets over-sold. One of the most important considerations here is the APR. At all costs, you should try and ensure that your interest rate is not high when you opt in for a debt consolidation loan.
Every entrepreneur willing to clear their credit card loan through debt consolidation loan should research on this subject before opting in for it. If you resonate with this, you can browse through online sources like Nationaldebtrelief.com and many others to learn more on the subject. When you have your queries sorted you can go ahead select the loan type.
Ways to consolidate credit card debt
Do you want to consolidate your existing credit card debt by witnessing a low-interest rate? If yes, here are three ways to opt in for:
The personal loans
Today, the marketplace is replete with lenders. So getting a low-interest personal loan is very easy. There are the majority of lenders that will enable you to opt in for personal loans at a specific interest rate that doesn’t affect your credit score in any way possible. There are several online websites available today that you can refer to, for this purpose. And some of the sites find variable interest rate which is very low, such as 4.74%.
The credit card balance transfers
The credit card companies provide teaser rates that are very low as 0%. It acts as an incentive to procure more customers on board. However, if you record a good credit score and don’t incur debt as well, you can opt in for a credit card balance transfer. It will be one of the best and affordable options available for you.
The line of credit and home equity loans
Previously, when the financial crisis of 2008, this used to be the most used processes of consolidating credit card debt. The principal advantage of a home equity loan is that it provides a meager interest rate. It also has the capacity to minus the interest rate. However, some entrepreneurs have been placing their residences at risk and tempt themselves by expanding the term. The credit unions today provide a low-interest rate today. So it’s a smart call to take a visit to the local credit union. You can also get in touch with a national credit union and have access to the home equity loans that have an interest rate which is as low as 3.74%.
The debt consolidation plans that you should avoid
Entrepreneurs who are stressing out to settle their credit card bills faster often are tempted by various debt management companies. These companies will most often make use of a marketing language that will appear like a debt consolidation loan service. However, a debt management organization asks for direct payment to them than the credit card organizations, where you owe the money. Furthermore, these companies will get hold of your capital submitted in an escrow account, but won’t repay the credit card bills. Hence, gradually, your credit accounts are bound to become aberrant. It will negatively impact your credit score. Also, you will face more and more collection calls.
Also, there are debt management companies that will abstain for making any payments. Instead, they will attempt to negotiate a settlement with your creditors on your behalf. The credit card companies will collect payments aggressively for the initial 180 days. And after this tenure, the debt gets written off. Entrepreneurs who are willing to repay their credit card debt can seek the assistance of a non-profit consumer credit counselor right at the start than seeking help from a debt management company.
In today’s shifting business world incurring a credit card debt is not unnatural. Businesses need to make profits and also expand their operations. And in settle existing bills, paying for employee salary and investing in inventories for future business expansion, businesses often incur credit card debts. Though debt consolidation is a great way to settle the same, you need to research on the subject well before you opt in for it. The above-discussed pointers will help in deciding the way you want to clear your credit card debt.