Credit Card Consolidation – Get Out of Debt Faster?
If you have credit card debt, chances are that you have heard that credit card consolidation can be your saving grace when it comes to getting out of debt faster or at least making your debt more manageable, but is this true, or are these advertisements just a fly by night scam, or truly legit.
Well to answer that question as well as let yourself see if the benefits outweigh the negatives when it comes to credit card consolidation, we are going to bring to you a list of easy to read pros and cons of credit card consolidation as well as a summary to if and/or when consolidation of your credit cards is really worth it. Being that all people’s situations are different, you can decide whether the benefits do outweigh the negatives or not.
One Payment – If you have multiple different credit cards then credit card consolidation can allow you to group all of your credit card debt into one single payment each month. This is done by the consolidation company which you choose to be a client with, as they essentially pay your debt to your credit card holders, so now they are the holder of all of your debt. This benefit is really cool as you only have to worry about making one payment each month as well as only having to call one resource for any questions you have regarding your account.
No Harassment – Once your debt is transferred to a credit card consolidation company, you will no longer receive any calls from your old credit card companies, as all of the calls go directly to your consolidation provider, leaving you out of the equation, and leaving them to deal with whatever it is they are calling about.
Lower Interest Rates – NOTE: This one can be either a pro or a con. Consolidation is known for providing much lower interest rates than what you are currently paying to your credit card lenders. BUT, make sure that when the consolidator you are going with is in fact providing you with better terms that what your other credit card companies are. This can also be great for you as you will be paying fewer fees in interest which you can take the money you saved on the lower interest and use it towards eliminating your debt.
Different Types of Debt – Credit card consolidation can be done for many different types of credit card debt, like mortgages, student loans, department store debt, etc.
Mortgage Benefits – If the credit card consolidation is being done for a home mortgage, often times these payments are considered as a tax deduction which isn’t the case when you are paying to anyone besides a credit card colidator.
Debt Payoff Incentive – Having just one payment provides a very high incentive to pay off your debt as well as speed up the time to pay off your loan. Having multiple payments makes one feel overwhelmed and always worrying about which one to pay off first, as well as ending up paying the minimum on each of them, which the minimum payment is the curse of all curses, as it keeps you in debt for the longest period of time.
Longer Repayment Term – Credit card consolidation offers the perk of enjoying a lower monthly payment, but this is done by getting you into a longer repayment term. Longer repayment terms equate to you paying a lot more in interest, as there will be more years that will be provided to you to pay off your loan debt. Although this can be convenient if your consolidator doesn’t require a fee for higher payments like for example, if you need to pay low payments first if you are in a financial pinch, then later on you have enough money to up the payments.
Bad Credit Acceptable – Many credit card consolidation companies still allow you to do business with them even though you have bad credit, but often times this come with higher interest payments. Also, in general, credit card consolidation has been known to negatively affect your credit score as any settlement that is negotiated will come up on your credit report, and the act of negotiation is view as negative, and also result in a frozen account.
Fees – Often time’s credit card consolidation companies require that you pay an upfront fee for their service, and can be in the thousands of dollars, which is exactly what you don’t need. Try to find one who requires no fee for activation.
Scams & Lies – If your credit card consolidation company happens to pay late to your old credit card companies, this can result in you paying penalties and being responsible for any outstanding balance. Often times, credit card consolidators don’t fulfill all that they are boasting about doing for you.
Certain Debt Amount – Often times, in order to participate in credit card consolidation, you must have a certain total of debt in your name, and if you have lower than this amount you cannot consolidate.
Further Debt Temptation – Once all of a person’s debt is wiped away from your credit card companies and are only paying one fee to your credit card consolidation company, your credit balances are at zero, which leads one to having a lot more available credit to your disposal now. Having this new found freedom can lead to people getting more credit cards and starting the process all over again. You can remedy this by only using a credit card for serious situations, and not for everything you buy.
Credit Card Consolidation General Tips (If you choose to consolidate)
Credit Card Consolidation Pros & Cons
If you feel like the benefits outweigh the negatives and you do choose to go with a credit card consolidor in order to make your debt more manageable or any other reason, and then shop around for the lowest interest rates and best terms. Credit card debt is at an all time high and credit card consolidation companies know this and are all out there trying to compete for your business, which is great for you as they are constantly trying to provide better benefits than their competitors. By shopping around and checking out at least 3 different credit card consolidation companies, you will enable yourself to find the best terms out there that will benefit your debt situation.
Also, you can enjoy the benefits of credit card consolidation even if you have just one loan.
Find a credit card consolidation company who doesn’t charge you a penalty fee for paying higher than the minimum monthly payment. Like it was said above, this will allow you to enjoy the benefits of credit card consolidation as well as pay your debt off faster.
Like it was said above, there are many scams and unfulfilled promises. To avoid these scams, do your research on the credit card consolidation company that you are thinking about going with, and read the customer overviews where you will get real life information on whether they will provide you with what they say or not.
Stop using your credit cards ASAP! By doing this, the debt will not continue to pile up on you and you will just have to pay whatever is left when you stopped using them.
Not Choosing Credit Card Consolidation
If you don’t like the idea of credit card consolidation, you can still get debt relief. Here are a couple tips that can help you out:
You can talk to your credit card companies and explain to them your situation. Often times they are willing to negotiate better terms for your specific situation.
Saving for retirement can help you pay off your credit card debt. By saving for retirement, the money you save is considered to be tax deductible which when you get this deduction check, you can use it towards eliminating your payments. You can also take out this retirement fund and use it on your debt as well.
Consider Settlement – Debt settlement can be a great choice that can allow you to pay off your debt fast on a total that is a lot less than what you originally owe. Although they require usually one lump payment, or a couple large payments, you can always save up for some time and knock your debt out this way.
Like stated above, stop using credit card payments ASAP!
Credit Card Consolidation Conclusion
At the end of the day, the act of credit card consolidation should only be used by people who have high amounts of debt and can only pay the minimum payment on their debt. By using credit card consolidation, these people can enable themselves to be able to afford smaller payments by paying just one loan payment which will be at a lower cumulative total than what they were paying, and allow them the chance to be able to pay more in the future when the can afford to pay more.
Hopefully you enjoyed this article on credit card consolidation, and hopefully it was the exact information you need in order to make the final decision whether consolidation is right for you or not.