A credit card consolidation loan can be an effective tool for lowering monthly payments, reducing interest rates, and getting out of debt. But consolidation loans aren’t always the best option. Therefore it’s important to look at the details very carefully and consider your alternatives before taking on new debt.
What Is A Credit Card Consolidation Loan?
A credit card consolidation loan allows you to pay off multiple credit card balances with money from a new loan. The interest rate on your debt consolidation credit card loan should be lower than the average of your original loans. This helps you to save money on finance charges and lower your monthly payment. Credit card consolidation loans also offer the possibility of paying the money back over a longer period. This way, it helps you lower your monthly payment even further. These may also leave you more deeply in debt. This is especially true if you haven’t found a way to address the financial issues that got you into debt originally.
What Do You Need to Know?
When you’re carrying high credit card balances, a credit card consolidation loan may seem like a very attractive option for reducing credit card debt. But it’s important to do your homework before you sign up for another loan. Sometimes this kind of consolidation loan can be effective. However, other times you may wind up paying more to retire your debt than you originally would have. The for-profit companies that offer you these types of loans make money off the arrangement. Therefore, this comes at an additional cost.
Alternatives to a Debt Consolidation Loan
When it comes to debt resolution, one highly effective alternative to a consolidation loan is a debt management program. A debt management program consolidates all of your monthly payments to credit card companies into a single payment. This not only simplifies your life financially but helps to make sure you’re paying your credit card bills on time.
For helpful advice before taking out a credit card consolidation loan, consult with the financial professionals at American Consumer Credit Counseling by calling 800-769-3571.