You are burdened with debts and the end of the rope. There must be a way out. You go to the door every day, waiting for bad news. Minimum credit card payments absorb most of your salary every two weeks. You cannot go to dinner, go on a trip or save on your child’s education, and it only gets worse. You are using your credit cards for living expenses now. It really sucks!
Many people find themselves in this situation; "Credit Card Death Spiral." As the burden of credit cards in the country continues to grow, the number of people facing this credit nightmare is growing at an alarming rate. This happens for many reasons and is depressing and debilitating. Credit card companies have eased the initial requirements for obtaining a card in the last few years. The change allows people with minimal credit points to receive multiple credit cards. In addition, many of these cards have higher credit limits than in the past. This combination has prompted many consumers to take on much higher levels of debt than in the past.
In addition to easing credit card requirements, lenders are changing the way they do business as soon as the consumer receives the card. In the past, banks and other credit card issuers did not allow you to charge more than your credit limit. This has changed. Now many financial institutions will accept a commission, even if it exceeds the credit limit. When an account exceeds the limit, they charge a large fee, raise the cardholder’s bid, or both. Many credit card issuers do this, and it can raise
credit card rates over 40%!
Here is one common scenario. You have a card with a rate of 12% and a credit limit of $ 5,000. The current balance on your card is $ 4,475.00, and you pick up your clothes and school supplies immediately after they sell them to school. You visit several stores and pick up some items. Like most people, your account balance is not remembered. Your last purchase will only take you a few dollars over your limit. The charge is still approved.
Imagine your surprise when you receive your next credit card statement. Your interest rate has been raised to 30%, and the minimum payment, which was $ 88.00, is now $ 168.00.
To really pour salt on your wounds, the bank added a fee of $ 39.95 for exceeding the credit limit. It gets a lot worse. The 29% interest rate applies not only to your purchases, but to the entire balance of your credit card!
This type of scenario happens hundreds of times every day. If this check box is not selected, you will be taken to the “Credit Card Death Spiral,” which ends in bankruptcy many times, or at least a terrible credit picture. There are ways to avoid this chain of events. One option for many is a debt consolidation loan.
A consolidation loan consolidates a borrower's debts by repaying smaller loans with one larger loan. This type of loan usually uses capital in the home of the borrower as collateral for the loan. Having a secured loan allows the interest rate to be much, much lower than an unsecured credit card loan. A lower rate creates a single payment, which is significantly lower than the amount of previous credit card payments.