Minimum Payments and Debt
Many people only pay the minimum credit card balance on a monthly basis. While this minimum amount may seem insignificant, the truth is that paying a small amount can really cost you a lot of money. Why?
When you add the interest rate of your credit card to the minimum monthly payment, you are really paying far more than that small amount. The best course of action if you can’t afford to pay off your card completely each month, is to pay a little more than the amount due. For example, paying $50 instead of the $40 that is due will help you to pay off your entire balance sooner.
But, what if you can’t pay any more than the minimum amount due? After all, trying to pay any monthly bill often results in struggle if you have lots of bills. In this case, there’s no point in simply making minimum payments.
Likewise, skipping payments in order to free-up extra funds is not a good idea. While you may not care that you miss a payment or two, your credit report will be greatly, and negatively, impacted as a result. What can be done about this type of dire situation?
Applying for a debt consolidation loan is an ideal way to pay off a large chunk of your credit cards once and for all. Even if you already have bad credit, you can still consolidate your debt by applying for a secured loan such as a car title loan. These loans are easy to attain, they won’t cause you a lot of grief, and you can pay them back quickly. Many private lenders offer flexible repayment plans that enable you to make payments to suit your budget. The best part is that when comparing a personal loan to the amount of interest that you will pay by making minimum payments, a personal loan won’t cost you as much money.
Many personal lenders will allow you to apply for this type of loan online. In addition, these loans are often granted regardless of your credit history. This means that you can get the money you need to pay your bills without worrying about your application being denied due to bad credit.
Once you have paid off a large percentage of your credit card bill, you can then get back on track by making more than the minimum monthly payment. Far too many people wind up paying thousands of dollars more to credit card companies than they actually have to.
On average, it will take nearly 20 years to pay off a credit card balance of $5,000 at a 14% APR if you only pay the minimum monthly amount. While it probably only took you a few months to spend $5,000, you’ll be paying for it for many years to come. Unless, of course, you take action against those credit card payments right away.
A debt consolidation loan is a great way to bridge the gap between making minimum payments, and paying off your debts for good. Clearly, paying your credit company small amounts each month is not worth your hard-earned money. Make sure to clear up your debts as quickly as you can by paying more than the minimum amount, and by applying for a loan that will help you get rid of those pesky payments.
Filed Under The Credit Card TrapComments
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