Tag Archives: balance transfer
Pitfalls of debt consolidation
In my mail box everyday I receive at least one or two mails regarding the debt consolidation companies and services and I always wonder how many people will be taken into these attractive statements without knowing much about the details. The luring claims of these companies include;
1. To decrease interest rate to almost a zero level.
2.50% lessening of monthly payments
3. A security to your company and debt.
If you are stuck into this whole system of unpaid debt these statements would look like a relieving pain killer or an exact ointment on your wounds. But before actually jumping on any of these services let me give a few drawbacks of this whole methodology that will compel you to think appropriately and then decide.
Zero Interest Rate
Well, zero interest rate is not possible humanly, because no fooling is sitting in these companies to let you spend all his money gaining no profit in return. Its just like you need to have a detailed calculation about the monthly payments you are going to make and the time period. Most of the times youll come to know that interest rate are as much as 22 to 25% high. You may be paying less monthly amounts but yeah the duration will be much prolonged.
Payments and their Share in these
You will pay your monthly amount to these debt consolidation companies and then lets see what can happen to those. First of all you may notice that they are having their share or fees in every payment and ultimately paying the creditor a lesser one. Then some of these companies are even notorious to make late payments or missed payments that will worsen your credit score and your rating for payments.
Balance Transfer Cards
These low interest balance transfer cards re very much into market these days even you can have dozens of them in your pocket. But what is the drawback? You ask for such a balance transfer cards and pay that low interest payments for few days, but after that time this interest rate is diminished and you have to either pay the original interest or even more than that thatll be devastating.
Negotiating
This is the part they said they are expert in, but actually they are misleading you so as not to involve you in this whole matter. The better option here will be to negotiate with the companies by you so that you wont have any doubts regarding the payments.
Balance Transfer Credit Card – Debt Consolidation
Balance transfer credit cards can provide an excellent option for debt consolidation. Many Americans are currently in debt and struggling for a way out. Some choose to use a home equity loan to help get themselves out of debt, but not everyone has a home with built up equity to use for this purpose. In addition, putting your home up as collateral for debt consolidation can be a bit nerve-wracking and many banks enforce annual maintenance fees and monetary penalties if you try to close the equity line before a specified period of time.
Rising Interest Rates
Anyone that has been a credit card holder for some time or who pays attention to the financial marketplace knows that credit card rates on many cards have been on the rise. Often, credit card companies are more than happy to increase interest rates when the prime rate is raised, but they are not so quick to bring the rates down when the prime rate decreases. By consolidating your debt with a balance transfer credit card, you can remove your debt from your high interest cards and place it on your card with a lower interest rate. The best balance transfer credit cards offer low introductory rates or low fixed rates on balance transfers, making them a great option for debt consolidation.
What to Look For
When looking for a balance transfer card for debt consolidation, you generally want to find the card with the lowest long-term rate. More than likely, you will be consolidating a debt that you will be unable to pay in a short period of time. If this is the case, your low interest introductory period may be over long before you are done paying off the debt.
You also need to be cautious about fees when looking to consolidate debt with a balance transfer credit card. Many credit cards charge a fee for transferring balances from another card onto theirs. The best balance transfer credit cards will not charge an additional fee. In addition, some balance transfer credit cards require transferred balances to be requested at the time of application for the card in order to be eligible for the special introductory offer. While this may be fine for some people, you might want to have the flexibility to transfer balances. In this case, you will want to select a card that allows you to transfer balances any time throughout the introductory period.
For the very best balance transfer credit cards, you will want to find one that maintains the low APR throughout the life of the balance you have transferred. In other words, a balance you transfer on a card may have a 0.00% APR for the first six months, but then rocket to 19.99% when the period is over. On the best balance transfer credit cards, however, the low introductory offer remains in place until you pay off the entire amount you have transferred.
Self-Discipline
Obviously, a balance transfer credit card cannot do all of the work for you. While you can consolidate all of your bills onto just one card, you will need to be disciplined enough to pay the balance off. If your introductory period expires after so many months, you should create a budgetary plan that will have the balance paid off by the time the period is over. You might need to cut out some of the extras, such as the cup of fancy coffee you grab every morning, to help create a little extra cash flow. It will be well worth it when you find yourself out of debt. In addition, the money you are saving in finance charges should be paid toward your credit card debt