Credit Card Consolidation
For people that have many different payments each month to worry about, they often consider credit card consolidation because of the attractiveness of one single payment. It also allows you to pay off your entire balance faster than normal minimum payments.
You must start by deciding which credit card debt relief program is best for your situation. Usually you can find a solution that offers one single payment, however there are many different elements to each debt relief program.
How Can Credit Card Debt Consolidation Save Money?
What Does Credit Card Debt Consolidation Mean?
Debt Consolidation Loan
Credit card consolidation can be interpreted “generally” or “specifically.” In a “general” sense it refers to the idea of taking the payments associated with multiple lines of credit and reducing all the payments into one payment. “Specifically” it means to accomplish this by taking out a new bank loan.
Debt Consolidation Loan
Debt Consolidation is actually getting a loan from a bank at a lower interest rate than their credit cards, use that money to pay off their credit card debt and then make only one payment to the bank that issued the loan.
Benefits of a Debt Consolidation Loan:
- Get out of debt faster…typically 5 years
- One monthly payment…but remember, most debt relief programs offer this feature.
- Lower interest rates, but not in all cases. Some banks do not participate in credit counseling programs at all (Bank of America is one of them)
- Debt consolidation loans have become very hard to get because the banks don’t like giving loans out that are intended to pay off credit card debt. Plus, if you have a lot of debt, it isn’t likely a bank wants to be responsible for more debt in your name.
- You are taking UNSECURED debt (your credit card debt) and turning it into SECURED debt (meaning the bank will only issue the loan if you secure the loan with your assets, like your house!) Being able to pay off credit cards is one thing, but if you can’t pay your mortgage, you’re in big trouble!
- By getting another loan you aren’t really solving anything. You are essentially “borrowing from Peter to pay Paul.” It’s only a matter of time before you need to start looking for another loan. This is a common trap people get caught up in and instead you should determine if you can qualify for another debt relief option.