Debt Payment Mistake: Using Line of Credit for Credit Card Debt

Credit card debt is one of the hardest to get out of. The temptation to use them is always present and you are constantly find yourself battling that urge. However, there are debt relief options available that can help you solve your credit problem once and for all. These options, though effective in their own right should be selected carefully. You need to know the right program to use because selecting the wrong one can lead to disaster.

One of the most controversial debt relief programs is using a line of credit to pay off credit card debt. This is one way of using debt consolidation loans as a way to pay your debts. While it can be effective in its own right, you need to understand that it poses a huge danger of putting you deeper into debt if you approach it the wrong way.

A line of credit is an agreement between consumers and a bank or credit company. Consumers are allowed to take out a loan that is within the set amount of the line of credit. This is great for emergency situations. However, as a debt relief option, it may not be the best course to take. Before we discuss the pitfalls, let us discuss why it can work for some people’s debts.

There are two benefits if you use this type of debt relief. The first is it can lead to slightly lower monthly payments - at least if you used a line of credit that has a low interest rate than the average rate on your current debts. The other benefit is an easier payment scheme - since you only have one creditor to concentrate on. The key to make this work is to have enough discipline to curb your spending habit - which incidentally, is one of the pitfalls of using a line of credit to pay off your debts.

When you use this type of debt relief, you have to know that this is only a temporary solution. You are not reducing your debt balance and there is no payment plan in place. What you just did is to shift your debts around so it is combined in one account.

While the stress of paying multiple creditors are gone, that ease can prove to be a double edged sword. If things get too easy, debtors sometimes get the wrong impression of having less debts to deal with. After using the line of credit to pay off their other credit cards, it will return to zero balance and that can raise the temptation to use them again for unnecessary purchases.

Another danger in this debt relief option is it may require you to put up a collateral in order to avail of the low interest rate on the new loan. If this is the case, then you are endangering these personal assets from being seized by the creditor if you are unable to pay off your loan.

This type of debt relief requires a steady source of income. Not only that, a low debt to income ratio is also necessary to make this work. If you do not have this, then you need to look for another way to pay off your debts.

Click Here to see the different debt relief options compared against each other. National Debt Relief is a debt relief company that served thousands of consumers to help get rid of their debts.