Debt Consolidation: How Credit Crunching Works
Two Ways that Reduce Credit Card Debt: Debt Consolidation and Credit Crunching
The whole idea behind reducing credit card debt is to lower the amount the interest you are paying. That’s why many people take their high interest credit cards and combine them into one lower interest payment that they acquire through a debt consolidation loan. Besides debt consolidation, people also use credit crunching in order to pay down excessive credit card debt. If you want to take remedial measures to restore your credit rating and reduce your debt, then debt consolidation or credit crunching are two approaches that are definitely worth trying.
Formulate a Plan
Before you decide which of the two aforementioned measures is the best action to take, you’ll want to formulate a plan. Create a schedule that lists you debts, posting the name of the credit card issuer, the account balance, the rate of interest, and your monthly payment. List each debt so that the credit card account with the highest rate of interest is listed first, on down to the last credit card account with the lowest interest rate. That will give you a good idea of the average amount of interest you are paying and whether it is better to consolidate the debt at a lower interest rate or use the credit crunch approach.
Credit Crunching
If you do choose to credit crunch, you will need to take the schedule you’ve prepared and use it as a reference. Pay as much as possible on the first card on the list and pay the minimum balances on the other cards until you pay off the first credit card account Keep repeating the process, paying as much as possible on the second credit card, and paying the minimum balances on the other cards until, again, the first card on the list is fully paid. Keep on going until you’ve paid off all your credit cards. You may find that the credit crunch approach toward paying off debt is preferable, particularly if you don’t want to take out a home equity loan to consolidate your debt. As you stand to lose your home if you can’t meet the payment, credit crunching may be a better solution than debt consolidation for paying off the outstanding balances on your credit cards.
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