Among other things, a credit card debt consolidation loan serves as a way of stepping through a series of smaller loans – each with a smaller amount of money – as you make payments on one or more of the smaller loans and then re-establish a debt-to-income ratio that is closer to 50:50.
A credit card debt consolidation loan means that you ‘re paying off all your outstanding credit card debt – as opposed to holding on to the oldest credit card account that is still active.
When borrowing money or paying off old credit cards, you also establish a path back to a healthier credit profile, which in turn will improve your credit score in the eyes of credit score agencies and your credit report.
If you have outstanding credit card debts or you’re just a teenager struggling to re-establish your credit standing, you just might be in a position to apply for a credit card debt consolidation loan. Although a credit card debt consolidation loan has often been labeled as a ‘loan for students’, most people begin the process by the age of 30-years-old, which is one more step. In fact, students tend to have older parents than they do straight people and single parents, so it may actually be easier for them to begin the process of ‘debtor’ credit card debt consolidation.
When applying for and receiving a credit card, it’s not uncommon for the credit card company to send invites for applications. They usually include a letter of offer, often mailed to you. These letters would include your application and the specific reasons you’re wanting to apply for a new credit card.
Most credit card companies will send applications in at least one or two mailings. So, for most applications that begin this year, you may receive eight to twelve offers. This gives you time to think about which credit card you want to apply for — you should definitely pick one that will help you take full advantage of the new credit card program soon.
Besides the fact that you’re already in the credit card debt consolidation program, you’re also probably wondering ‘just how can I do this”? Well, there are a number of ways. The first is to transfer the old balances onto a new credit card that has a lower interest rate, which will gradually lower your debt. This can be a great idea if you find a new low interest credit card and you’re carrying a balance from month to month. Another way is to transfer balances onto the 0% APR credit card and save on interest. You’ll also not have to pay any interest if you carry a balance as long as one, since the interest rate will not be changed.
If you plan to carry a balance from month to month, read through all the offers carefully — there are a lot of them. Each offer includes some serious upfront cost information that you should know and understand very clearly. Also, you’ll want to keep track of any balance transfers — most credit card companies will send transfers without a transfer fee if you’re attempting to pay off a debt in advance of any transfer.
When applying for new credit cards, there are some guidelines that you need to follow. First, read each company’s policy and Terms and Conditions carefully. They can give you a good idea on how credit card debt consolidation can work. You’ll want to go through the fine print that covers what happens when you incur a debt without an interest rate on the original agreement. There’s also the clause stating ‘you can only transfer balances with a secured-debt account’ or ‘can only transfer balances up to a secured credit card’. Some companies will not even let you transfer a balance with a specified-interest-rate-increase feature until it’s over, others you may want to sign up for a second account or pay off of a secondary account.
Be sure to look at all the terms and conditions that apply to each company you send offers to. If you think they don’t mention any other details, you’ll want to shop around and check them out first. Remember, even a small balance transfer with a pre-asset-as-passing-factor-secured (the total amount transferred after the introductory period) can have a negative impact on your credit score — if you do not pay off the debt quickly, even 10-15% will not get you through the long introductory period, and will not help you to regain your quality of life. In fact, the short tenure of this account-as-passing-factor alone can hurt your credit score.