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Debt snowball and avalanche: How are they different from one another?

January 17, 2013

Are you suffering from excessive credit card debt? If yes, then you must know that such problems arise when you have multiple credit cards and you use them all at the same time. Coming out of credit card debt is necessary if you want to lead a debt free life. It is generally seen that credit card debt problems can be eliminated with the help of suitable debt relief options such as credit card consolidation, debt settlement or credit counselling. However, you need to know that there are other methods too that will help you wipe away your debt problems. Amongst these are debt snowball and debt avalanche. Read on to know how these methods may help you solve your debt problems.

Debt snowball method

While trying to eradicate your credit card debts, you should first try to pay off the debts that have high interest rate. According to this method, you should pay off your low interest rate debt at first. The benefit of starting with the debt that has low rate of interest is that you can pay it off quickly. The money that you were paying towards it can be used to repay the debt that has low interest rate and is next on your debt list. When you manage to pay off the debts soon, you’ll feel encouraged towards the goal of repaying your debts. You will not find any interest if you do not see fruitful results after you pay a lot towards the debt with the maximum interest rate. As such, this may dishearten you and you may stop making the debt payments.

Credit Card Debt Repay (Snowball Vs Avalanche)

 

Debt avalanche method

In a debt avalanche method, you pay off the debts at first that have the high interest rate. You should target the credit card debt that has the high interest rate. You make the minimum payments for all the debts but make more than the minimum payment towards the debt that has the highest rate of interest. After you pay off this debt, you should ponder on the next debt that has the high rate of interest. Under this method, you pay off the debt that has high interest rate. As such, the amount you pay goes towards paying the interest with little payments towards the principal. This is the reason why the outcome comes much later and your motivation level seems to be very low.

It completely depends upon your debt situation as to which option you may choose. Apart from credit card consolidation, debt settlement and credit counseling, both debt snowball and avalanche helps you eliminate your credit card debts. If you have outstanding debts that are of the same rate of interest, then it is better that you choose the snowball method. On the other hand, if you have high and low interest rate debts as, then you should choose the avalanche method to solve your debt problems. Which ever method you may opt for, it will help you reduce your debt problems so that you can lead a debt free life. Find more on this topic http://www.debtconsolidationcare.com/credit-card.html

Credit card debt consolidation: Why should you take help of this option?

August 20, 2012

 

Credit card debt consolidation

Credit cards have become an indispensable part of our everyday life which unfortunately for many can lead to rising debt and the need for credit card debt consolidation. Without credit cards, we are unable to make our online business transactions, travel arrangements, movie and restaurant bookings, etc. As a result, a large number of people are staggering under the burden of credit card debt. If you’re one of them and want to get rid of those debts, you can check out of the option of credit card consolidation.

Advantages of credit card debt consolidation:

Most of the consumers, who are facing debt problems due to their credit cards, consider consolidation as the best means to get rid of the debts. Some of the advantages of credit card debt consolidation are listed below for your benefit:

  • Reduction in interest rates: By consolidating the credit card debts, you will be able to reduce the interest rates on your unpaid accounts. Thus, in the long run, you will be able to use the saved money to make more payments toward your principal amount.
  • One monthly payment: Credit card consolidation will help you avoid paying multiple payments on multiple cards. It will help you in consolidating all the payments into one monthly payment which will make things easier and convenient for you.
  • Late fees waived off: Once you consolidate your credit card debts, it will help you in eliminating your late fees on the accounts. It will also help you avoid the over limit fees which the credit card issuer had charged you.
  • Avoid bankruptcy: Filing bankruptcy can be the worst possible way to get rid of debts. It leaves a huge negative impact on a person’s credit report. Credit card consolidation will help you in avoiding bankruptcy filing due to credit card debts.
  • Stop collection calls: If you consolidate your credit card debts, it will help you in either stopping or reducing the collection calls. When you sign a limited power of attorney with the consolidation company, you actually give them the permission to handle all the collection calls on your behalf.

Things to consider when you go for credit card debt consolidation:

There are certain things which you need to keep in mind when you’re in a credit card consolidation program. Some of them are listed below:

  • Emergency fund: Though most of us avoid setting up an emergency fund, it should be a priority for you when you’ve enrolled for consolidating your credit card debts. Emergency situation can arise at any point of time. Thus, when you’re preparing your monthly budget, keep aside a specific amount every month for your emergency fund.
  • Organize spending and save money: Controlling your spending habits is the best way to save money and use it to pay off any kind of secured and unsecured debts. This is a solution for all your financial problems. When you enroll yourself for a credit card consolidation program, the consultant over there will guide you to budget your income and expenses. This will help you in avoiding any kind of default on your future payments.
  • Avoiding credit cards for the time being: It is advised that when you’ve enrolled in a credit card debt consolidation program, you should avoid using your credit cards. If you don’t do so, you won’t be able to pay off your past debts. However, it is also recommended that you don’t close down your account right away.

Thus, when you’ve incurred credit card debts, you now know which option you should go for in order to get rid of them and manage your finances better. Credit card debt consolidation is more manageable and possible than ever before.

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