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Many credit card companies will offer debt consolidation loans for you to pay off your unsecured debt. The interest rates for these types of loans are variable, usually starting in the range of 6-8%. Terms are usually five years. Are these types of loans a smart means for eliminating your debt?

You need to analyze all aspects when deciding whether or not to utilize the debt consolidation loan being offered to you by your credit card company.

Below are some important things to consider:

  - The credit card company is offering you a 'deal' that seems really good. However, a variable interest rate loan should be avoided at all times. Why? Variable rates are based on the prime rate, which has been increasing steadily, and has been forecasted to continue to increase.

  - You are having difficulties paying your existing monthly minimums.  It has become hard for you to pay-off a loan that has probably by now amortized over  8 - 10 years. The law is that your minimum payments must cover interest and fees. Allowing you pay-off your loan over a realistic time period.  However, your bank will determine what is realistic, and it is typically between eight and ten years.  So, if you choose a repayment time frame of five-years, your monthly principal total is going to rise.  A short termed lower interest rate can mean that you will have a reduced payment, however, this is not certain because of the variable interest rate. The interest rate of a five year term loan will not change. 

 - Does the debt consolidation loan offers by the credit card company have a pre-payment penalty? Some cards will charge a penalty for early payments of these loans.  Also, does the card have late payment penalties? Some card have provisions that state if you are ever late on a payment, your interest rate will rise to a penalty rate. Some card issuers will raise your interest rate just because your credit score has gone down, even if you were never late on any payments.

If your variable interest rate is increased for any of the reasons above, you can wind up paying a great deal more than what you owe.

Let us help you!
If you ever receive a debt consolidation offer from your credit card company, present it to us. We may be able to offer you a debt consolidation loan alternative that will better suite your situation, and help you save money.

We also suggest you educate yourself about the dangers of credit card cash advances.

Top Related Stories:
Taking Charge of Your Credit Card Debt
Debt Consolidation Programs vs. Debt Consolidation Loans
Fundamental Advice to Pursue Prior to Applying for a Debt Consolidation Loan

More Offers for Eliminating Unsecured Debts

Unsecured Debt Consolidation Loans - Combine your debts into one payment, with a lowered interest rate.

Credit Counseling - Let us help you get rid of your debt and teach you how to manage your finances.

Home Equity Debt Consolidation Loans - Utilize the equity from your home to settle your outstanding debts, or you can refinance your mortgage for consolidating debt even with bad credit.




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