Credit card debt that has gotten out of hand can make anyone feel as if they are working as indentured servants to their card companies. The average American has a stack of bills coming in each month, and most Americans simply do not have the money to pay more than the minimum monthly payment on those bills. However, paying the bare minimum on this type of debt can allow the debt to grow to a massive mountain that will take years to pay off.
Credit card consolidation can allow most cardholders to become debt free faster. However, any borrower who is considering credit card consolidation should be aware of the pros and cons involved in the process before they decide whether or not this type of repayment is right for them.
Pros Of Credit Card Debt Consolidation
Lower your monthly payments. This is one of the most alluring benefits of consolidation. Right now, you are likely paying three, four, five, or even more companies each month.
Your credit card debt consolidation takes all of those debts and combines them into one loan that is usually far less than the total of your combined payments each month. This leaves you with more money left over each month for other purposes and allows you to avoid charging more debt onto your credit cards.
Reduce your interest rate. Many credit cards carry a high interest rate, which is a main culprit to keeping cardholders indebted to the card issuer. Your debt consolidation loan will have a much more attractive interest rate that you can afford.
Simply make one payment to one creditor. As mentioned before, you may be paying many companies right now for multiple cards. Your debt consolidation payment is made to one lender, saving you the hassle of writing multiple checks or logging into multiple websites to pay online each month.
Get out of debt faster. Because your debt consolidation loan costs less interest, you will be paying more on the principle amount that you owe. This allows you to get out of debt faster, especially if you have been making just the minimum monthly payment on your cards which usually does not even cover the interest charges.
Cons Of Credit Card Debt Consolidation
Being tempted to get into debt further. While debt consolidation is a great move for most cardholders, the temptation to get into debt even further is amplified after debt consolidation goes through and credit card balances are zeroed out. This means that you will have lots of available credit at your fingertips. Avoid the temptation by closing all but your oldest credit card accounts, and use them only for emergencies.
Dealing with a disreputable credit card debt consolidation company. While they are many good companies out there who deliver on what they promise, there are also those companies who do not have your best interest at heart and may be outright scams. Do your homework before you agree to anything, and always go with a company that has been established for a number of years.