I know few people who have resisted the temptation to buy things with the power of a firm. Most of us start using the credit card with some fear, but soon it becomes vice. Interest-free months are the biggest hook to get caught in the financial web where credit cards are converted.
You buy some tennis, you pay with the card and everything is fine, then you go on vacation, the plane, hotel and meals you pay with the card, months without interest to make us heavy, so the story continues until you reach the top of the card limit. Sometimes the bank ventures to increase your credit limit and you continue with the same behavior, other times a new bank gives you another card that extends that network in which you have already been trapped.
Month by month you pay the cards, but little by little you realize that it is only enough to cover the minimum amount to be paid. Obviously you pay it, so that they do not block you and you can continue using your cards and with it the debt grows every day. If this scenario seems familiar to you, continue reading, possibly in this text you will find a way out that is not so painful.
Have you hit bottom?
If you have already reached the point where it is extremely difficult for you to cover the minimum card payments, then you have reached the bottom and it is only a matter of time before you lose your composure and fall behind in payments. Don’t do it, in truth, your future will be compromised if you make that decision. There are options. It will not be simple but it will be worth it.
One option is the re-financing of the credit card, it is also known as debt consolidation, or more commonly, joining all your cards into one. What is it, when to do it and how?
Refinancing means taking a new loan, ideally, with more favorable conditions, to cover an existing loan. There are different ways to refinance credit card debts. One is to take out a home equity loan, another is with a personal loan and the most common is to transfer several credit card balances to another card with a high credit line and a low CAT (total annual cost). Let’s start by reviewing the last option
Transfer all credit card balances to one.
Suppose you have a couple of cards, in one you have a debit of $ 45,000 dollars, it has an interest rate of 45% with a CAT of 57%. The other card has little time with you and you only owe $ 25,000 dollars, its interest rate is 29% with a CAT of 34 percent. You could contact the bank that issued the second card, explain your situation so that you can transfer the balance of the first card, in whole or in part. By doing this you would save a lot of money for interest, since the second card has a lower interest, in addition to the annuity.
I simplified the situation a lot so that it could serve as an example, the real situations tend to be more complex. But if you are already in a similar situation, start monitoring the different options offered by the bank. There are banks that offer cards specially designed to transfer balances from other cards, and give you low interest.
If you decide to transfer the balance of your other cards to one of this type, you must pay attention to the conditions, many times the interest rate is promotional, that is, after a previously stipulated period, the interest rate will increase.
Even with these conditions it can be a good alternative, just keep in mind that you will be against the clock and take advantage of that promotion period to pay as much as you can and get out of the quagmire quickly. Take advantage if the bank offers you to transfer balances for free, otherwise, this type of paperwork has a cost, it can be a percentage of the amount you want to transfer or a fixed amount, whichever is greater. It also asks if there are other fees or penalties, either for prepayment, non-payment or non-compliance with the amounts.
When balances are transferred to a new credit card, a contract is signed, the minimum and maximum amounts of the transfer are stipulated in the most important clauses of this contract. Ask the minimum amount and the maximum debit limit to be transferred. I am of the idea that it is better that you stay with a single card, I would look for the option that allows me to do it.
One very important thing: You should not have late payments on other credit cards, otherwise it will be very difficult for a bank to agree to transfer your balances. My final recommendation is that you analyze different options, and stay with the one that offers you the greatest incentives. For example, rewards programs, free annuity and being exempt from the collection of other commissions. After all, a virtue must be made of necessity.
Refinancing with personal loan
It is possible that you have several credit cards, all to the limit and consolidate the debt of several cards into one is no longer an option or not the best. Do not be discouraged, you can request a personal loan in order to liquidate all your cards.
Actually this is a good option, because the interest rate on this type of credit is lower; Regarding credit cards and the term, it can be extended for 4 or 5 years, so the monthly payments will be very low and you will see how your disposable income increases.
Again, take these types of measures before falling into insolvency of payments, otherwise your credit history will already have problems and you will not be able to access the best options.
Check out the different alternatives offered by traditional banking and Fintech . This industry is offering very attractive conditions and quick availability of money. Take into account within the refinancing costs the commissions or charges for the new credit, to know if it really suits you or it is preferable to look for another option.
Mortgage credit refinancing
A loan whose guarantee is a property can be very risky, but it can also be the most convenient, because insurance is the option that has the lowest interest rate and the longest term.
Borrow just enough to pay your credit cards. Make a financial plan that allows you to repay the home equity loan as quickly as possible. Remember that a home equity loan means that you put the property as collateral for the debt. If you did not pay the loan, you would lose your property.
Learn the lesson
It may be that you have chosen to consolidate your debts into a single credit card, therefore, you have a card. Do not use it, if necessary do not have it within reach. If there is a great need for a credit card, choose the one with the lowest interest rate and benefits that really make a difference to you.
Many times we do not take the appropriate measures because we expect our finances to improve as if by magic, we say things like “next month I compensate it” or “with the extra income I am going to get, I pay what I owe”. You have to be realistic and not let the debt continue to increase. Stop the financial “hemorrhage”, because the money you borrowed generates interest, and at least for me, there is nothing sadder than spending money on interest, because it is money that is not enjoyed in some experience or object, it is simply money thrown away
If you managed to refinance your debt and signed a commitment with a monthly installment
It is best to meet on time. The primary goal should be to pay as soon as possible. Therefore, adjust your expenses to the bare minimum. If you are unable to adjust your expenses, then you will be in trouble again in no time. Try to pay at least 5% or 6% of the total debt each month. Do not pay only the minimum amount.
It is understandable that a person loses his head and enters a spiral of debts with a credit card that is difficult to leave. But re-incurring the same behavior two or three times is no longer acceptable. Once you have refinanced your credit cards and you have gotten out of debt, keep one, do not fear them or the satanices, learn to use them with intelligence and responsibility, they are a great tool that facilitates your existence.