Credit Card Debt Consolidation FAQ's
Can I apply for credit card debt consolidation with bad credit?
Does credit card debt consolidation hurt or help my credit rating?
As long as you make repayments on time and don’t miss repayments then credit card debt consolidation loans can actually boost your credit rating! Entering into a repayment plan and making repayments on time looks great on your credit report as you prove that you are a responsible borrower.
Juggling multiple loans can be really hard to manage. It can be confusing, expensive and time-consuming keeping on top of all your different debts. Consequently, many people fall behind on repayments and as a result, become a victim of bad credit. Debt consolidation helps to take these complications away. Having 1 single repayment plan in place with credit card debt consolidation makes keeping on top of payments much easier, can improve your credit rating and can actually save you money.
Your credit rating may take a minor setback at the initial point of applying for a debt consolidation loan. This is because many lenders put a hard credit inquiry on your credit report when you first apply for a loan. However, in the long term you can expect your credit rating to benefit as a result of credit card debt consolidation.
What are some tips to get credit card debt under control?
Pay your bills on time – An obvious one, but paying your bills on time will make sure you don’t fall behind on repayments to the point where they become out of control. Making your repayments on time also means that your credit score won’t fall. If anything, it will rise if you are responsible with your repayments.
Maintain a low credit utilisation ratio – Your credit utilisation ratio is the amount that you owe in comparison to your total credit limit. Experts claim that anything between 0% – 30% is a good credit utilisation ratio. The lower the amount you owe, the better the impact on your credit score.
Budget effectively – Create a budget to gain a greater understanding of your finances. If you understand when and how much money is coming in and out each week then you’ll be better prepared to take on your debts.
Don’t spend above your means – No matter how tempting that new pair of shoes or that shiny new car looks, if it means spending above your means so you cannot afford to pay off your debts then think again.
Set money aside for emergencies – Putting a portion of your income aside each week will help to cover ay unexpected bills or unplanned expenses that you might face at some point down the line. Even if the unexpected doesn’t happen, it is good to know you are covered in case it does. This way, you won’t have to neglect your loan repayments or apply for more finance if you do need some extra cash fast.
Make spending plans – Planning your spending out is a great habit to get into. Writing out your grocery list and sticking to it, rather than making impulse purchases is a great way to start. Setting aside spending money is also a great habit to get into so you know exactly how much you have available to spend and how much should remain untouched. Have a big event coming up? Plan your spending around it in order to cater for it.
Can I use debt consolidation without closing credit cards?
Yes, although it depends on your situation. If you have good credit and a limited amount of debt, you probably won’t need to close your existing accounts. You can use a balance transfer or even a debt consolidation loan without this restriction. Getting a balance transfer credit card never comes with restrictions. If you get approved for the card, the creditor will not require you to close your other cards.
After going ahead with credit card debt consolidation and bringing the amount owed to your credit card providers down to $0, it’s not recommended to cancel your credit card accounts. Having a zero-balance credit utilisation ratio will boost your credit rating.
If you do close your credit accounts off then your available credit will shrink, lowering your credit utilisation ratio and if you need to access finance in the near future, it will be a much harder if you have to go through the process of applying for & being approved credit cards again.
If you find yourself being too tempted with your credit cards still being available then lock them or store them away somewhere safe to avoid the temptation. Do you have issues with controlling your spending or living beyond your means? If so, you need to address these problems before looking to enter into a finance agreement such as a debt consolidation loan. Otherwise, you could face serious financial problems later down the line. Without controlling your spending, you could end up with a high level of outstanding debt again before too long.
Can I use debt consolidation without closing credit cards?
Yes, although it depends on your situation. If you have good credit and a limited amount of debt, you probably won’t need to close your existing accounts. You can use a balance transfer or even a debt consolidation loan without this restriction. Getting a balance transfer credit card never comes with restrictions. If you get approved for the card, the creditor will not require you to close your other cards.
After going ahead with credit card debt consolidation and bringing the amount owed to your credit card providers down to $0, it’s not recommended to cancel your credit card accounts. Having a zero-balance credit utilisation ratio will boost your credit rating.
If you do close your credit accounts off then your available credit will shrink, lowering your credit utilisation ratio and if you need to access finance in the near future, it will be a much harder if you have to go through the process of applying for & being approved credit cards again.
If you find yourself being too tempted with your credit cards still being available then lock them or store them away somewhere safe to avoid the temptation. Do you have issues with controlling your spending or living beyond your means? If so, you need to address these problems before looking to enter into a finance agreement such as a debt consolidation loan. Otherwise, you could face serious financial problems later down the line. Without controlling your spending, you could end up with a high level of outstanding debt again before too long.
What are options other than credit card debt consolidation?
If credit card debt consolidation isn’t the finance solution for you, then Australian Lending Centre has a wide range of other financial products which might be more suited to you. If you want to avoid receiving a credit enquiry when first applying for a debt consolidation loan, then a no credit check loan might be of interest to you. This type of loan usually comes with higher interest rates and lower loan amounts; however, you can get funding fast with no credit check loans. Another loan option which might be useful is a low doc loan. If you don’t have the documentation required by traditional banks then low doc loans give you the opportunity to still get finance with minimal paperwork. If you have bad credit and would like to clear your credit file and improve your credit score before applying for a debt consolidation loan then we recommend that you get in touch with Clean Credit and request credit repair support.
What are the benefits of credit card debt consolidation?
Credit card debt consolidation is a great way to take control of your finances. It can be easy to lose track of your repayments and see your debts mount up. Credit card repayments are also confusing. It can be hard to work out how much you need to pay each month and it can also be hard to remember to make the repayment. Each credit card also often has a different interest rate which can make things even more complicated. There are so many numbers and percentages, yet no clear payment structure.
