One of the reasons why consolidating credit card debt is a preferable option is because it stops the high interest pegged to your credit card from accumulating any further.
The other reason is that you clear your debt in one payment. You could be stuck with maxed out credit cards that are of no use to you and you will not manage to clear the debts by paying the usual minimum amount.
Another benefit of debt consolidation is that the counseling offered helps you fix your bad financial practices.
However, debt consolidation is not for everyone. If you visit a debt consolidation company and find that the service is not cut out for you, below are some other methods that the consolidation company might recommend for getting rid of high interest credit card debts:
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Get rid of your credit cards
The truth is, you cannot use what you don’t have. Credit cards have their place but until you have cleared your debts, you need to learn to live without them.
When you pay for your purchases with your credit card, you pay a transaction fee. Therefore, in principle, you are paying more than what is on the price tag.
Learn to buy in cash. Otherwise, a good alternative for your credit card will be to open a separate debit account that you use only for your expenses. This account will not have the usual fees associated to your credit card account.
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Cut back on spending and redirect that money to monthly payments
One of the things you will learn in credit counseling is how to track spending. Living within what you can afford is a discipline that ensures you will never be in debt.
Monitor your expenses over a week to four weeks and cut out the unnecessary spending. For instance, if you buy lunch at work, replace it with packed lunch and you will realize a lot of saving.
Reroute the money you save towards clearing your debts.
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Create a budget
Besides cutting back on spending, a budget is a good tool to have because it will make you know when you have exceeded your spending.
If you don’t have a budget, you will end up spending until you run out of money. At that point, you will have to get a cash advance from your credit card.
You need always to remember, credit card money is not your money. Therefore, create a budget so that you will never need to resort to borrowing from your credit card.
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Home loan refinancing
Home loan refinancing is a type of consolidation loan. Your mortgage has lower interest than your credit card debts because it is a secured loan.
Consolidating your credit card debt into your mortgage is a good option, but you have to be smart about how you use your credit card from then henceforth, otherwise you could end up losing your home.
Discuss the above four options with your credit counselor and use one or all of them.