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Should I Get a Debt Consolidation Loan or Apply for a Lower Interest Credit Card and Transfer the Debt?



debt and credit cards photoWe have all been there, mounting credit card bills and the interest rate makes it seem as though the balance never goes down.

Now, out of nowhere, a lower interest credit card comes in the mail and you are thinking about transferring your balances over to save money. Is it smart to use a credit card transfer or should you get a debt consolidation loan?

Transferring credit card balances can turn into an ugly cycle for a variety of reasons. Firstly, most people will not cancel the credit card with the higher rate. They will say they need to keep it, “just in case.” However, what usually happens is they see that available cash and decide to treat themselves to something.

Then they buy something else, and then maybe one more thing. Before you know it, the card is maxed out again and now you are stuck with two credit card bills!

The second problem with transferring balances is that most cards today only offer an introductory rate. That five percent or even zero percent is great for now, but what happens in six months when the rate skyrockets to 17.99 percent or higher? Now you are right back where you started, or possibly even worse!

An advantage in securing a debt consolidation loan is that the interest rate is locked in for the term of the loan. Your rate will not go up in six months if you have not paid off the debt. If you got the loan at five or six percent, that is the rate through the last payment.



Now, you really need to sit down and figure out which will work best for your situation. For instance, if your debt is £1,000 and you can afford to pay £200 per month, a zero interest credit card with an introductory rate for six months is the way to go.

It may even be the best route to take if you are able to pay the debt completely off one or two months after that introductory rate expires. If that is not the case, you are more than likely better off getting a debt consolidation loan.

If you decide to go the credit card route, make sure you cancel the first card after the balance has been transferred. It is just too easy to fall into the trap thousands upon which thousands of people in your exact situation have already fallen victim. That card with that empty balance is truly like the carrot dangling in front of the horse. You can have all the will power in the world, but one moment of weakness can set your finances into a deadly spiral.

Sit down, evaluate all of your options, and choose the route that will give you the most financial freedom the soonest. If the debt is small, it would be foolish to turn down the ability to pay off the debt with little or no interest.

However, if the debt is significant and will last longer than the introductory rate of the credit card, it is much wiser to get a debt consolidation loan with a locked in rate and make your monthly payment. By the way, you should still cancel that card!



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