To get out of the debt cycle you are in and get rid of your growing debt, there are some beneficial ways to absolve your credit card debt.
First, let’s consider what you need to know about debt and credit card consolidation and how are they processing.
About Debt Consolidation
Debt Consolidation is a helpful method to pay off your debt in a way that combining multiple high interest debts into one single lower interest which is much more cheaper, faster and requiring less effort. Consolidation of debts can be done by using balance transfer credit cards, home equity loans and/or personal loans. Personal debts/loans and credit card debts can be consolidated. However, student debts, mortgages and most of the car loans cannot be collected into one big group.
There are some options to organize debt payments as following;
Debt Consolidation Options
- Balance Transfer Credit Card
- Fixed Rate Personal Loan
- Revolving Mortgage
The main idea of these options is the creation and organization of total debts into one single lower interest rate payment monthly. The interest rate and duration of the repayment is related to terms you deal with the lender.
- Applying for a Balance Transfer Card: The process contains collecting your multiple debts into one group, mostly new credit card with lower interest rate. If you have a good credit history, you may even find 0% interest rate offers from some lenders for a introductory period. This offer is valid for certain period of time to clean balance. Thus, it is important to plan your repayment Schedule well. Even if you cannot qualify for 0% offer, there are some other rates starting from 6.99% p.a. to complete repay with less effort and more manageable level of rate.
- Applying for a Fixed Rate Personal Loan: Receiving money from your lender to pay off your high interest debts allow you to be charged one single interest rate. Then, you will become debt free faster.
- Revolving Mortgage: For application the only condition is having a house, comparing with the two options mentioned above, this process is more risky because your house is pledged for security, if you do not repay the debt, you may lose your property. Equity in your property will lead to a loan on it. The interest rate naturally will be lower than any personal loan or a standart credit card.
Facts About Debt Consolidation in New Zealand
- Lenders consider your credit score while deciding whether you are eligible.
- Be careful about the debt consolidation limits, rates and duration –repay Schedule-
- Income and debt ratio are closely related so before application consider your debt does not exceeds 50% of your income.
- Rather than loan, using a balance transfer credit card can be a better option due to its lower interest rate.