Credit card debt can turn out to be quite tricky. Not only are credit card interest rates notoriously high. If you are late with your monthly payments, you can accumulate a significant amount of additional high-interest debt, which can prove to be financially straining.
As credit card debt usually has the highest interest rates, taking care of this part of your finances should be your priority,
When it comes to credit card debt, you have several different options available.
The most common way to consolidate your credit card debt is to take out a single unsecured personal loan. Such a loan will typically have a low interest rate. However, keep in mind that in order to take out a credit card consolidation loan, you need to have a solid credit score.
You can also opt to use the Debt Management Programme (DMP) in Canada, through which you get a credit counsellor assigned. This person will then create a personalized financial plan tailored to your specific situation. During this process, you might want to contact your credit card issuers to negotiate eliminating some of your accumulated penalties and lowering your interest rates. Once your credit card debt is consolidated, you’ll be required to make monthly payments to your counsellor, who will then pay your credit card companies on your behalf.
Ultimately, the third way to consolidate credit card debt is through a balance transfer. With this solution, you simply transfer all your credit card debt to a new credit card with a lower interest rate. This interest rate should ideally be lower than the lowest interest on your existing credit card debt. Otherwise, the only advantage you’ll have is having only one instead of multiple monthly payments. Also, remember that credit card companies charge fees for balance transfers, usually as a certain percentage of the balance being transferred.
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