Choosing Credit Cards Or Loans For Debt Consolidation

Choosing Credit Cards Or Loans For Debt Consolidation

by

Sergey Yazovsky

Depending on your financial situation you may be able to get a new credit card to consolidate your debt. On the other hand you may decide that it is far better to consolidate your debt into a loan. There are many considerations you need to make with regards to debt relief and debt consolidation. We will look at those here as a means to help you.

Credit Cards

Credit cards tend to be extremely easy to obtain as long as you have proof of income. You may be able to get a new credit card that will have a high enough credit limit to take on all of your credit card debt. It will depend on your current situation and the amount of your combined household income. If a credit card is an option consider the balance transfer fee, the interest rate, and any special rate you may be offered.

Credit cards do offer zero percent interest sometimes, but the balance transfer fee may be extremely high along with the interest. In fact most credit card interest rates are at least twice that of the current unsecured loan rates.

Loans

Debt consolidation loans are often the better choice for your debt relief. A debt consolidation loan will take all of your debts and combine them into an unsecured loan. Granted, unsecured loans are at a higher rate than secured loans like a mortgage, but you should still find savings over credit card interest. Most home loans are at 4 percent right now, which means an unsecured loan may be around 8 percent. Most credit cards willing to give you a high credit limit for the debt consolidation you need will be upwards of 12 percent interest. Many will be closer to the 20 percent mark if you have already allowed your credit scores to falter.

The point is that debt consolidation loans or a personal loan may be your best solution to debt. Granted you will need to conduct research regarding the various loans and credit cards, but you definitely want to look out for the differences in each option to find the one that best suits you.

If you own your own home or car, there may be a solution to obtaining a secure loan. Most cars lose value, but if you own it free and clear a credit union may be willing to take your car as collateral to offer you a loan. In this event, you can take the money for debt relief and pay down one or more of your debts. It will depend on the current value of your car. Note you will not be awarded full value in a loan for your car as the bank does not want a negative equity situation.

A second mortgage may also pay down your unsecured debts and help you find a better monthly payment along with a better interest. Make certain you exhaust all options with regards to debt relief.

Copyright (c) 2013 Sergey Yazovsky

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