Is Credit Card Debt Consolidation For You?
With credit card debt consolidation, you get to combine all your credit cards and any loan payments you have into a single monthly payment. This payment is usually lower than the amounts of all your individual debts. Sometimes, people also resort to credit card debt consolidation to get better rates. You may sometimes get a better rate on consolidation than the rate you presently have, so why not consolidate and save money?
To find out if the consolidation rate is lower than the present interest rates, you should note all your credit card interest rates and get its average. If this rate is higher than the new rate, then it is better to consolidate. However, cards having a lower rate need not be included in the consolidation. People also consolidate credit cards to make life simple with only one payment to the debt consolidation company. This single payment cuts out on stress and bill paying time. However, in the long run, you may end up paying more than you would have without consolidation. So there is no point in consolidating only for the reason of being able to make a single payment every month!
Debt consolidation may be a simple procedure for some, but may also be a complicated situation for others. It is always better to turn to professionals like some companies and banks for credit card debt consolidation. However, check that there are no hidden fees so that you profit with the debt consolidation. Just as there are companies that may help you with consolidation, there are also many unscrupulous companies trying to take advantage of anyone over in debt.
Having a good credit history helps you consolidate the debt with balance transfers to a new credit card. Having a credit card with a low introductory rate lets you make more of your monthly payment towards the loan balance than to paying interest of the card. However, if you have a history of timely payments, you can always approach your credit card company to ask them to lower your interest rate instead of turning to credit card debt consolidation. They may lower the interest rate, if you mention that you got a better offer from a different bank. However, if you have a bad payment history, then you will have to opt for credit card debt consolidation.
You can also negotiate a large-sum settlement for your credit card outstanding balance. Here instead of credit card debt consolidation, the credit card accepts a portion of your debt and forgets the rest. They feel this is better than having you turn to a debt consolidation company. Here settlement is done depending on the interest rate, your balance and your payment history.
With credit card debt consolidation, there is only the tension of handling a single creditor every month. So if there are any problems or issues, all that has to be made will be a single call instead of several calls. However just as credit card debt consolidation has its pros; it has its cons too. It is very easy to get into further debt with credit card debt consolidation. This is because with a lighter load to handle, surplus money may be left over at the end of the month. This may tempt you to use credit cards again to spend more and end up in more debt!
Credit card debt consolidation takes a longer time to go through; perhaps 10 to 30 years. So instead of spending a few years to get out of credit card debt, you end up spending the time of your mortgage to get out of debt. Moreover, over the span of thirty years, you will be paying more than you would have if you had individual loans.
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September 5th, 2007 at 4:05 pm
Great article!
You may be surprised by what you can achieve by simply talking to your credit card company. They will often work with you to help make paying off your card easier. (lower rates, smaller monthly payments, etc.) The most important thing you can do is -change your spending habits- you’re never going to get out of debt if you continue to spend in the way that got you into debt in the first place.