Credit card debt consolidation often seems to be one of the easiest way to tackle overwhelming credit card debt.
However, even after you consolidate your debt the debt still exists, you just have fewer payments make each and every month.
"Debt is like any other trap, easy enough to get into,
but hard enough to get out of."
- Henry Wheeler Shaw |
The best alternative to credit card debt consolidation would be TO GET OUT OF DEBT COMPLETELY.
Don't get tricked into the debt consolidation services 'con game'. Very often debt consolidation companies take advantage of people by gaining their confidence and simply moving the debt from several lenders to a single lender. In the end you may pay more, not less.
You are told that credit card debt consolidation is the answer to your prayers, but instead you end up racking up more debt over time.
Although your monthly payment may initially decrease, the total amount you pay in interest over time skyrockets! This is what a credit card debt consolidation plan usually does. What kind of debt consolidation help is that?
Instead, you should opt for another method that will make you debt free once and for all. We recommend the 'debt snowball' method, which is taught by many leading personal finance experts. Dave Ramsey, author of the book 'Financial Peace' and "The Total Money Makeover" is a radio talk show host and owner of the Lampo group, which counsels people about how to pay off and stay out of debt.
Snowballing consists of first knocking off debts that are smaller and easier to pay off. This lets you see the 'little wins' quickly as you begin reducing your debts - creating some much needed traction right away.
This momentum will build and strengthen your confidence, spurring you on to conquer your financial problems. As you continue through your list of debts using the debt snowball, you will pay off and close each credit account. You will progressively payoff debt from smallest largest balance until your debt free.
It is recommended to create a $1000 emergency fund as a first step to take care of any unforeseen expenses that might pop up during the debt snowball plan. Remember, the debt snowball takes the place of credit card debt consolidation, which really does nothing to reduce your debt.
The basic principle of debt snowballing involves paying only the minimum payments on all debts except the one with the smallest balance. Concentrate on paying off only one account at a time.
The debt snowball involves getting rid of the smallest debts first, regardless of the rates of interest involved. This will ensure quick wins and continued momentum.
Remember, paying off one debt does not mean lessening your monthly outgo toward debt reduction as long as other debts remain in existence. You simply add the payment amount of the 'paid off' debt to the payment for the next debt in the snowball.
Compounding payments allows you to get rid of debt very quickly, which will fuel your passion to eventually becoming debt free. Building momentum for 'snowballing' debts one after another is the key to your financial success.
Debt snowballing outweights any advantages of credit card debt consolidation.
Some experts even suggest listing all your debts on a sheet with payments listed in a 'smallest to largest' order. When you pay off a debt, check it off your list with a red marker so you can see your progress.
Using the snowball method for debt reduction you will become DEBT FREE in a much shorter period of time. Be sure to close every account once it is paid off to ensure you'll never go back to your old ways of buying on credit.
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"Who goes a-borrowing goeth a-sorrowing."
- Thomas Tusser |
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Debt is NOT your friend. It's not a wonderful "tool" for building wealth. That's a myth.
