Although credit card debt consolidation may permit a reduction in interest rates and lessen monthly payments, it can also mean a longer repayment term and more interest.
The route to credit consolidation
In the first instance, let’s put things in their true perspective; the first being that credit consolidation does not make the debts disappear! Although it can have the effect of reducing the monthly payment, it still remains an obligation for you to clear it. Therefore, if you’re unable to afford the monthly payments, or don’t have an income on a regular basis, consolidating your outstanding credit card facilities will not provide the right solution. Suggested alternatives include debt negotiation, designed to reduce the balance on your credit cards, or bankruptcy!
Moving from the doom and gloom into a more positive aspect, a primary benefit of credit consolidation is gaining a reduced interest rate. This factor provides you with the opportunity of reducing your monthly payment, enabling a faster debt settlement. However, if you cannot reduce interest rates by consolidating your credit card debt, then it’s possibly not worth considering.
A credit card consolidation insight
Simply put, obtaining a debt consolidation loan enables you to settle all your outstanding credit. In effect, instead of owing money to multiple facilities, like credit cards, you now have only one obligation or creditor. The sum of your regular monthly payment is based on the total credit sum, applied interest rate, and the payment terms of your credit consolidation.
There are established professionals available to help regarding the credit consolidation procedures. They can assist in consolidating or managing your outstanding credit card debt and negotiate reduced payments on your behalf.
The process followed is that instead of obtaining another loan to pay off your outstanding credit, they attempt to persuade your creditors to reduce the applicable interest rates or lower your monthly payments by other means. If successful, you make a single monthly payment to your credit consolidation representative, who distributes it proportionally to each of your creditors.
The time factors
In every aspect of our lives, time is a determining factor, and it’s the same regarding your credit consolidation. If you take this action the result can be a significant reduction in your monthly repayments, but, don’t presume this is due to a lower interest rate. It may give you some relief to have a monthly payment plan that is more manageable; however, it also means the payment of more interest during the outstanding loan term! Therefore, ensure you review the terms of a credit consolidation carefully and even seek professional advice before deciding that it is the right route for you to follow.