When you’re faced with mounting credit card payments, consolidating credit card debt is one of your best solutions. It essentially turns all of your multiple credit card debts into one single debt. This makes it easier for you to pay. For example, if you have three credit cards and they have differing interest rates. One is 2.25%, another is 3.5%, and the last one is around 1.95%. If you have outstanding debts with all three, then you will have to pay them separately. It can be hard juggling your finances to meet the interests and pay down the loans. Consolidating these three debts into a single loan will make it easy for you to pay it off.
The biggest advantage of consolidating is that it can help ensure that your credit rating isn’t damaged. It probably has already taken a beating if you are resorting to debt consolidation. Maintaining it at a good level is essential if you want your financial health to stay good.
What to Think About
However, you shouldn’t just jump into consolidating your credit card debt. There are several things to consider before you start your move for debt consolidation. Thinking about them will ensure that you won’t be making a mistake in doing your consolidating. Here’s what you should consider:
Your Ability to Pay. The very first thing that you should consider is whether you will be able to afford to pay the debt consolidation loan. Putting all of your credit card debt into a single loan does make it easier to pay – however, it does not mean that you might not be able afford it. If you can pay your debts easily enough, then there’s no need to go to this option.
The Interest Rate. Some debt consolidation companies can be predatory in their practices. Review the interest rates that they are offering you and do some math. If you end up paying more after the debt consolidation, then you should consider staying with your current payment scheme. However, if you do find a payment plan that saves you money, seriously think about your debt consolidation options.
Secured or Unsecured? There are currently two types of debt consolidation loans: secured and unsecured. Secured loans usually have you putting up something in collateral, usually your house or any other high-value asset. This allows the loan to be larger or even lowers the interest rate. Most of the time this is not offered to those with large loans or those with bad credit ratings. Unsecured loans are a lot safer for you and are a lot more accessible. Don’t go for secured loans unless you really need to.
Other Options. A credit card debt consolidation loan should be a last resort. There are other options available like credit counseling services and even debt negotiations. These are a lot easier to push through and are sometimes even better than getting a new loan.
The Fine Print. Shop around for possible loan offers and check their fine print. You don’t want to make a mistake in signing up for loans that have default clauses and high interest rates.
Consolidating credit card debt is a good move towards regaining your financial health. However, you’ll want to put some thought into it before making your move. Join the discussion at consolidation.creditcard. Here are bonus tips to help pay down your debt: https://www.umsystem.edu/newscentral/totalrewards/2017/05/29/pay-down-your-debt-while-saving-with-these-tips-from-fidelity/.
When choosing a credit card debt consolidation loan, there’s a ton of things to consider. Read more at consolidation.creditcard so you don’t commit mistakes that will put you in more trouble.