If you are like most Americans, your mail box is filled with offers for credit cards, mortgage refinancing and home equity loans. Many of those offers stress the benefits of moving existing balances to the new lenders. While that may sound appealing, especially if the new loan offers an attractive initial interest rate, it is important to consider all the factors associated with debt consolidation.
Debt Consolidation is Debt Management, Not Debt Elimination
Moving all your outstanding loan balances to one lender will not reduce the amount you owe. You must ultimately pay off the loan and pay interest until the loan is repaid. Your goal should be using debt wisely. Consider the following steps:
Paying Down Your Credit Card Debt
Even if you have not borrowed the maximum allowed for your credit card, paying down your balance should be one of your top priorities.
- Pay more than the minimum on your credit card balance. Interest rates charged on most credit cards are usually much higher than those found on other loans.
- Make your credit card payment as soon as you get the statement. Doing so will help reduce the interest you are charged.
- Minimize your credit card usage for a period. Along with not subjecting higher balances to interest, using cash or a debit card may help you identify ways to spend less.