Using Credit Card Consolidation To Improve Your Finances

Money Matters Editor By Money Matters Editor 7 Min Read
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Today, personal debt is on the rise and most of this debt are credit card debt. So are you struggling with multiple credit repayments? If yes, then credit card consolidation could be the best option for you.

In short, consolidating your existing debts into a single balance on a credit card can help you to easily manage your personal finances. Credit card consolidation has various advantages and so, there are many who may opt for the same.

It’s all about combining your credit card debt into one low or 0% interest rate credit card. This is the best way to go if you feel like you’re paying too much in credit card interest.

Can credit card consolidation hurt your credit rating?

Credit card consolidation could help you understand your debt better and easily simplify your payments. However, some people claim that credit card debt consolidation can hurt your credit like credit card settlement.

credit card payment

So, should you then never opt for credit card consolidation? If you have too many credit cards and if the interest rates are too high to manage, you may have to consolidate your credit cards. But how can you use credit card consolidation not only to lower your credit card debts but also to improve your personal finances?

Nowadays, it’s important to attain the right knowledge regarding credit finances and the effect of consolidation. This will help you understand various other factors to consider to be able to improve your personal finances.

Ways to consolidate your credit card debts

There are mainly two options through which you can consolidate the credit cards. You can either work on consolidating the cards of your own or else you can take the help of a credit card consolidation agency.

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Either way, you may find that after consolidation, the credit cards are showing zero balance. You may as well plan to close down the accounts. Now, if you close down the accounts, you will see that your credit score start to drop all of a sudden. So, why is this happening?

 

It’s happening because if you close down the accounts, the total credit available for your usage lowers, and as a result, your credit report shows that you are indulging in greater credit usage. This will have a negative effect on your credit.

So, if you are worried about your own debts, below are the steps you should immediately take to keep yourself in control:

First of all, you should #1]. make an honest spreadsheet of every single one of your incomings and outgoings. This is what will help you decide if you can recover just by making day-to-day cutbacks, or if more serious action is required.

The next thing to do is to #2]. contact your lenders and explain your situation especially if you’re borrowing cash for essentials like food. You can even ask your lenders if you can switch to lower monthly repayments. Be honest and straightforward about it as they may be willing to negotiate if you have a plan in mind.

Also, you will need to #3]. prioritise your debts by dealing first with such debts as council tax and utilities. You will need to make sure that every minimum repayment is covered too. After that, pay most towards loans with the highest interest and charges.

Woman shopping online on her laptop

Arguably, the most important thing to do is to look for ways to #4]. cut your spending and save more on your expenditure. You can do this by switching supermarket, switching service providers or walking instead of driving, where possible.

The last thing to do to improve your finance to #5]. speak to a debt advisor. This is especially important if you can’t cover your minimum debt repayments or rent and bills. Please learn to be more prudent with money and don’t leave your debts unattended to as this will have negative impacts on your credit ratings.

Getting the best out of credit card consolidation

So, if you would want to make the maximum out of credit card consolidation, you will have to avoid closing down the credit card accounts. This is going to help in ensuring that, credit card consolidation does not result in lowered credit score.

SEE ALSO: Top 5 Ways You Can Improve Your Credit Score In The UK

Other than this, you should also make sure that you are making the on-time payments, and you should never miss any payments. For consolidation, even if it lowers the interest rate on your debt, does not ensure the incurrence of the interests.

It does also prohibit the creditor from reporting against you if you miss payments. So, the effects of the missed payments are going to be the same as before, even after consolidation. Moreover, the creditor too may lose all faith, and confidence, if you cannot maintain the payments even after the consolidation.

 

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