It can be a very good idea to consider taking out a small loan to pay off your credit card debt, especially if you are able to attain one with low interest rates. If your credit history is strong, you might be able to pay your debts quickly.
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Before you apply for a loan to consolidate credit card debt, you should know how much debt you have. If you owe $15,000 on your credit card with an APR of 18%, your loan should carry a much lower interest rate of about 10 or 11%. You can take the money and clear your credit card balance to zero. Now, with the lower interest rates and a time frame of 12 or 24 months, repaying the loan should be a lot less expensive.
How do I prepare for a credit card loan?
There are a few things you need to think about while you prepare for a credit card debt loan. First, you should know what your current credit situation looks like. Each year, you are entitled to receive a free copy of your credit report. Go to Annual CreditReport.com, enter your information, and request yours.
Read your entire report taking extra care to identify anything that doesn’t look right. Any inaccurate information can be removed by contacting a representative for assistance. They will provide you with the steps you need to complete to open an investigation into your credit report. Clear up any issues to help provide you with an accurate report.
Go over your other finances to determine where you can scale down and eliminate unnecessary spending. You should also focus on anything you would normally use your credit cards for and try to find a way to incorporate them into your household budget. Remember, the loan will need to be repaid; the amount will just be less. You are still taking on additional financial obligations.
Which lending institution should I choose?
There are many online companies that you can review before you make your selection. But when it comes to credit card loans, you should make sure you are dealing with someone very reputable. If you currently have a strong relationship with your personal financial institution, start there. If they cannot help you, ask them to lead you in the correct direction. They should have a list readily available.
Use your customized list of prospective lenders and log onto the Better Business Bureau website. Look for any serious complaints that their customers placed. Any company that has a solid foundation and major interest in their customers will have a positive score of B or A.
If any of your choices are rated lower than a B, you may want to reconsider using their services. Contact the remaining lending institutions on your list and make inquiries:
- Ask basic information about options and benefits
- Schedule appointments to meet if necessary
- Narrow your search based on your criteria and apply for the loan
What happens if my loan is not approved for the full amount?
If you are approved for a credit card loan, but do not receive the full amount requested you can still reduce your debt substantially. It just may take a little longer. For example, if your credit card debt totals $18,000 and your loan is approved for $10,000 you should pay $10,000. This may not zero your balance, but it will bring it down.
Some credit card companies may reduce your interest rate if you make a large payment. Once the payment is recorded, you should contact the credit bureaus to verify that your credit score has been updated. A positive credit rating should qualify you for a new credit card with a low balance transfer rate.
Apply for the new credit card and immediately transfer the remaining balance from your high interest credit card to your low interest credit card. Because the new credit card has a much lower interest rate, you should be able to pay the balance in a timely manner.
Credit card debt is a difficult situation to deal with. Unfortunately, many Americans continue to suffer and fall into the void of financial strain. When you need to relieve the stress and remove the debt, you can exercise a few options, including taking out a loan.
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