Eliminating Credit Card Debt
To consolidate credit card debt is one of the most common ways Americans choose to solve their credit card debt problem. Individuals accumulate credit card debt by getting caught up in the ease of paying via credit card. Before they know it, they owe more than they can afford to pay each month on multiple credit cards. Thus, they choose to consolidate credit card debts. This means that all credit card bills are rolled into one by a debt consolidation service or by obtaining a personal loan.
There are several beneficial reasons to consolidate credit card debts. First, instead of tracking several credit card debts a month, the borrower is only required to keep up with one payment. The borrower also doesnt bear with the burden of choosing between debts and having to neglect one credit card debt over another. Another reason to consolidate credit card debt would be for a lower interest rate. Typically, the interest rate of the consolidation service or personal loan to consolidate credit card debts is lower than some or all of the interest rates on the existing credit cards. To the relief of many borrowers who consolidate credit card debt, the choice results in an end to pressuring phone calls from impatient creditors. If you consolidate credit card debts through a consolidation service, the service will handle all contact with your creditors, including making the payment.
Although it can be beneficial for people to consolidate credit card debt, it comes at a cost. Naturally, there is a whole, new interest rate on the personal loan. The borrower could also be tempted to take out a loan for more than they owe to consolidate credit card debts and only put themselves deeper into debt. Some people may also find it difficult to obtain a personal loan since most banks require personal property as collateral. A debt consolidation service will typically charge a fee to consolidate credit card debts. In addition, if the consolidation service is late making a payment to the creditors, the borrower's credit score suffers. Finally, the borrower can no longer use the credit cards once they consolidate credit card debt through the consolidation service.