As the economy is in chaos, the unemployment rate rises by 10%, the credit crisis is tightening, and consumers are actively seeking to consolidate credit card debt. Many people are extremely determined to seek relief through a debt consolidation loan.
Since there are only a handful of options, consumers usually end up with a balance transfer or debt consolidation loan as an option to get credit debt assistance. It is true that the utility of one option relative to another depends primarily on the unsecured personal loan and the choice that the consumer can use to integrate credit card debt.
Interest-free credit card: short-term options for debt assistance
Although not a long-term solution to the debt problem, the April APR balance transfer is an interest-free way to integrate credit card debt for about 6 to 12 months. If the consumer wishes to extend the merger for a period of time, he or she will search for other 0 interest credit cards at the end of the initial period and transfer the balance before the interest-free credit card offer expires.
However, there are three major drawbacks to using short-term interest-free credit card balance transfers to consolidate credit debt.
Balance transfers usually require a 3-4% balance transfer fee. from
If the consumer is lucky, the balance transfer fee is capped at $50 to $75. However, in recent months, some issuers have cancelled the upper limit of the balance transfer fee.
A good credit score is critical to getting a 0 APR balance transfer. from
If the consumer misses the payment or delays payment for any other bill, this fact will be registered with the credit institution. The issuer unilaterally approves the application [especially an application with a 0 APR balance transfer offer].
This is a gamble. from
When using interest-free credit cards to consolidate debt, consumers are "betting about coming" [borrowing a term from a dice game]. The consumer bet he or she will be able to repay the credit debt or transfer the remaining balance to another interest-free credit card before the end of the time period.
This is a bleak gamble, especially in our current economic environment.
Therefore, interest-free credit cards should be reserved for those who can pay the balance within six to twelve months.
Unsecured debt consolidation loans: a long-term solution to credit debt
A long-term alternative to the interest-free credit card balance transfer game is to combine debt with a low-interest debt consolidation loan.
Unlike juggling involved in balance transfers, unsecured debt consolidation loans bring credit card debt relief out of complications. Debt consolidation reduces many credit card debt obligations to monthly repayments. Consumers do have the following advantages: [1] paying a low monthly fee, [2] understanding the security of all other debts, and [3] knowing that at the time of final payment, consumers will fully enjoy debt relief.
How about a secure credit card debt consolidation loan?
In most states, consumers can open a home equity line of credit [HELOC] and use the rights in their residency to consolidate credit debt. However, in our current economic environment, home values have plummeted and there may be no assets available.
Second, it is not a good idea to turn unsecured debt into a debt secured by your personal residence. Credit debt is legally unsecured personal debt. In other words, in most cases, creditors cannot take your home to deal with credit card defaults.
When consumers use HELOC to obtain a debt consolidation loan, they convert unsecured debt into debt guaranteed by his family.
This is rarely a good way to simplify family finances.
Therefore, when an unsecured consolidated loan is not available, even a short-term interest-free credit card or low-interest balance transfer option can be used for balance transfer.
Do you need a short-term or long-term debt consolidation solution?
If you have a small amount of unsecured personal debt, you can usually pay off within 6 to 12 months, then an interest-free credit card is a good choice for you. Prepare your transfer balance and generate a good credit score. Unsecured debt consolidation loans are preferred for those who need long-term solutions to help with debt and/or bad credit.
Visiting HELOC is not a smart choice for solving credit card debt problems.
Orignal From: Interest-free credit card balance transfer or debt consolidation loan - which is better?
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