Credit card debt consolidation today seems to be one of the best ways to tackle unmanageable multiple credit card loans.
However, even after you consolidate you still remain in debt, it is just that now you have one lender instead of many.
"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 'con game'. Very often debt consolidation companies take advantage of you, by gaining your confidence and simply moving the debt from several lenders to a single lender. In the end you 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 decrease, the total amount your pay in interest over time skyrockets! This is what usually a credit card debt consolidation plan does.
You should opt for another method that will make you debt free. We subscribe to the 'snowballing' method, which is taught by many leading experts. Dave Ramsey, author of the book 'Financial Peace' is a radio talk show host and owner of the Lampo group, which counsels people about how to get out and stay out of debt.
Snowballing consists of first knocking off debts that are easier to pay off. This lets you see the 'little wins' in reducing your debts, creating some much needed traction right off the bat.
This momentum will build and strengthen your confidence, spurring you on to conquer your financial problems. As you continue through the debt snowball, you will knock off more and more debts, moving progressively from smaller debts to larger ones.
It is recommended to create a $1000 emergency fund before starting on the plan, to take care of any unforeseen expenses that might pop up during the plan.
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, irrespective of the rates of interest involved.
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 overrides all 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, redo the sheet, sticking earlier ones on the wall where you can see your 'wins'.
As you go on reducing your debts, you add the payment of the knocked off debt to the payment for the next debt being 'snowballed'. This will lead to an ever-increasing snowball effect, to speed up 'pay offs' as you move further down the list.
Using the snowball plan you become DEBT FREE in a relatively short span 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.
