Credit Card Debt Consolidation Explained

Credit Card Debt Consolidation Explained

Credit cards are immensely popular all around the world. There is not a single person who has not heard of them or owns at least one. The reason for this increasing fame is their versatility. They make our lives easier in many ways. But as wonderful as they might be, they also have their drawbacks. Many carry high interest rates, pricy penalty fees, among other things. All that glitters is not gold.
If you have been a credit card fan for some time now, and you have fallen deep in debt due to spending without measure, then you are in trouble. Chances are you have many different credit cards, each of them probably charges you exorbitant interest rates. If that is your case, then this is the article for you. Here we will explain the basics of credit card debt consolidation, read on and find out how it goes!

So What IS Debt Consolidation?

When you take out a loan to pay off many other loans, or any form of debt, you are consolidating. This practice has the purpose of securing lower interest rates, fixed interest rates, or to conveniently transform a number of monthly payments into only one. If we are talking about consolidating credit card debt, the you would use the loan money to pay off the remaining debt (which can belong to one credit card or more) and begin repaying the loan in return.

Benefits And Advantages

Credit card interest rates con go up to 25% at times, which is awfully high. It is incredibly frustrating to see your debt increasing mainly due to interests. Consolidation has brought relief to many people. As the debt related to your credit cards is often an unsecured debt, what you can do is take a secured loan pledging your house as a collateral. A home equity loan, for example. These types of loan carry low interest rates, which translates into huge savings for you and your family. Along with peace of mind. What is more, this interest can be deducted!

Another great feature of debt consolidation which is not really taken into account is that it helps you to organize your finances. If you had 5 different payments because of your 5 credit cards, all with a different interest rate associated, and you consolidate into one payment, chances are you will find it a lot easier to put your finances in order. Saving opportunities will be easily spotted and a budget will be effortlessly planned out.

Worries And Concerns

You should only consolidate your debt if it presents future benefits to your financial situation. If it will not bring about savings or economical relief, it will not be worth the trouble. Also, if you decide to replace your unsecured debt with a secured one, bear in mind that if you fail to repay it, you will be risking the safety of your asset, facing foreclosure or repossession.

Other Options

If you are still not sure whether consolidating is the answer to your problems, let me tell you that there are other options out there. Debt negotiation or settlement is a possibility. Discussing a payment plan is another solution. Otherwise, you can try out transferring your credit card balances into other credit cards with different terms. You name it.