There is a single demon of the financial world that is responsible for more misery than any other. It is the credit card.
If you are careful with your money and you pay off the balance in full every month; a credit card can be a valuable friend. You can earn rewards and cool stuff and the interest is barely worth thinking about.
The trouble is this. Most Americans are not that careful with their money. (And, in fact, nor are most Brits, Australians, Canadians, etc.). Millions of people end up hooked to credit card debt and in a position where they just pay the minimum amount each month. Many others take years to clear their credit card debt.
You Might As Well Go To The Bank And Work For Free
Credit card interest rates are scandalous. Assuming that you paid the minimum payment on a card which is maxed out and you did so every month, without adding any more purchases to the card, it would often take up to 10 years to pay it all off.
You’d also find that it cost about 4 times the amount you originally borrowed.
That is. If you work for $40,000 a year and have $10,000 in credit card debt. This Is your reality:
You make approx. $19.23 an hour before tax.
After tax and deductions, it’s probably closer to $15.
Your $10,000 in debt will cost you nearly $40,000 to pay off at those minimum payments.
That is you will work for nearly 67 weeks, at your current job, to pay the bank for that $10,000 that you borrowed!
Yes, more than a year of your life. For a lousy $10,000!
Credit card debt is poison. It steals your life. Quite literally too.
If told you that I’d buy you a nice computer, would you be happy to work for 3 months straight to pay me back? Of course not.
Yet, that’s what credit card lenders do and they get away with it, over and over again.
This Is Where A Consolidation Loan Comes In
A consolidation loan is one where you take all your existing debts and roll them into a single loan, at a low interest rate.
That interest rate dramatically cuts the amount of your life that you give up to the bank when compared to credit card interest.
However, it’s important to know that you can’t go on using your credit cards when you have a loan like this – or you will find yourself in an even worse place a few years down the road.
Once you take a consolidation loan, round up your cards, and either put them in a drawer or if you don’t trust yourself not to spend – cut them up.
Also, if you have bad credit – you shouldn’t worry. It’s still possible to get a consolidation loan even if your own bank or finance company turns you down.
You can try UpStart which is a company the specializes in saying yes to people paying off their cards but who don’t have access to easy credit. Give them a try. You won’t regret it.