Don't Get Caught In The Debt Trap

More often than not, in pursuit of our dreams to accumulate wealth, we get
caught in debt traps. This is more so in an environment where it is easy to
get loans and credit. All credit is provided to us on the basis of our
capacity to work and earn in the process. Little do we realize that
accomplishment of any dream requires hard work and nothing but hard work.
There is no substitute to it. The irony is that many of us tend to forget
this adage and ultimately get in to a tangle from which it is hard to get
out.

The saddest part is that even those who work hard and earn a decent living,
get carried away in the mad pursuit of their dreams and get caught in a debt
trap. Credit cards tempt you and charging anything to them seems easy by
promising to pay later, not realizing that the interest charged on late
payments borders on usury. The difficult part starts when, once late in a
payment, the credit starts snowballing every month due to the exorbitant
rates of interest.

In such an unfortunate situation debt management advice is the only way to
keep bankruptcy at bay. Debt management advice has become more and more
common these days as many Americans are fast succumbing to the temptations
of easy loans and offers from credit card companies.

It is prudent if you do some research before seeking advice from the
numerous companies offering debt management advice.
There are companies that offer debt management advice for a fee and some of
them operate on no-profit no-loss basis. Some of them have developed special
relationships with creditors and can help in reducing your debt faster.

Once you are caught in a debt trap, the bill collectors start annoying you,
day in and day out, with phone calls. Such repeated phone calls are so
demoralizing that they may result in frustration and depression. The first
thing the companies offering debt management advice will do is to provide
temporary relief by arranging to stop these annoying phone calls.

A good company will help, not only in decimating your debt but also provide
debt management advice and guidance about how to manage your finances in
future, lest you get caught in debt all over again. Such guidance for the
future can prove to be of great help in shape of knowledge on how to reduce
your credit card interest rates. Apart from that a good debt management
professional will also give tips on how to manage to get lower interest
loans.

You need not be one of those in debt simply because the number of Americans
struggling with debt is on the rise.

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Options To Consolidate Credit Card Debt

Consolidate Credit Card Debt

When managing your existing credit cards seems overwhelming, one effective
way to ease both the financial and emotional burden of the cards is to
consider the option to consolidate credit card debt. There are several ways
to consolidate credit card debt, and there are many benefits that arise from
the choice to consolidate credit card debt.

First, what does it mean to consolidate credit card debt? One way to
consolidate credit card debt is to take out a new personal loan and use the
proceeds to pay down your existing credit cards. Another way to consolidate
credit card debt is to perform a balance transfer; this involves applying
for a new credit card which will allow you to transfer all the balances from
your existing cards onto this one new card.

Both of these methods to consolidate credit card debt involve opening an
additional unsecured credit account. Another alternative to consolidate
credit card debt is to look into borrowing against your home equity. One way
to do this is to take out a Home Equity Line of Credit (HELOC), which is
credit line against the equity in your home. You would then use the proceeds
of this to pay down all of your credit cards. Another way to take advantage
of the equity appreciation in your home to consolidate credit card debt is
to refinance your existing mortgage. As part of this refinance, you would
use some of the proceeds to pay off your existing credit cards. This type of
refinance is often called a debt consolidation refinance - you are
consolidating both your old mortgage and your existing credit cards into one
new mortgage.

Now that you understand how to consolidate credit card debt, it is important
to understand the benefits of this strategy.

.Lower Interest Rate: Perhaps the most significant benefit that results when
you consolidate credit card debt is that the new account that you are
opening will carry a lower interest rate than the rates on the credit cards
that you are paying off.
This means that it will cost you less over time to pay off your debt. If
your credit is strong enough, you may even qualify for a 0% balance
transfer, which means that you will not have to pay interest charges on your
debt for a set period of time.
Moreover, a secured loan (e.g. mortgage refinance, HELOC, etc.) will
generally have a lower interest rate than your existing credit cards.

.Faster Repayment Period: Along with saving money over the long term by
lowering your interest rate, you will also more than likely be offered a
lower monthly payment. This may be very attractive given your current
financial situation. However, if you are able to maintain your present
monthly payment amount after you consolidate credit card debt, you will be
able to pay off the new balance much more quickly than you would have with
the old credit cards.

.Ease of One Bill: Another very important benefit that comes with choosing
to consolidate credit card debt is the simplicity of having one monthly bill
that comes with the new account that you have opened. With multiple credit
cards you are receiving multiple bills, more than likely with different
payment due dates throughout the month. Not only is this difficult to keep
track of, it also increases the likelihood that you will miss a payment and
end up paying late fees and incurring higher interest rates. It is easy to
see how one monthly bill can lower your stress level considerably!

These are just some of the many attractive reasons to consolidate credit
card debt. Be sure to examine all of the financing options available to you
before deciding on the right one. You may be eligible for a loan or credit
card with very low interest rate relative to what you are paying.

About The Author: Brad Stroh is currently co-CEO of Freedom Financial
Network and http://www.Bills.com. If you would like more of Brad's
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