For a lot of people credit card debt consolidation seems like a really sensible option to straighten out their finances. But is it really a great way of handling debts? Is there no better way of taking care of credit card debt today?
Credit Card Debt
Credit card debt is the most common debt today. That’s because it is the easiest to get. Credit card companies have always made it easy for people to get cards. They have constantly been keen to reduce their requirements to allow more users. This led people to buy things that they can’t really afford and make them fall into debt. People know that heavy reliance on credit cards can lead to some problems but that has not stopped them from using them.
Debt Consolidation as an Answer
One of the solutions for taking care of credit card debt that people came up with is debt consolidation. The idea here is to combine all the debts incurred by using multiple credit cards and combine them as a single account. That is normally achieved by a loan that is large enough to cover for all the smaller debts.
Here are some of the reasons cited why debt consolidation is a good idea.
- It can improve your credit score
- It’s easier to keep track a single debt
- You might lower the interest and the monthly payments
By paying multiple debts all at once, your credit score would definitely improve, even if you would have a bigger loan. Obviously paying and managing a single debt is easier and simpler to do than tracking multiple obligations. You would have less chance of missing any payments when there is just one debt that you need to pay. There is also a possibility of reducing the interest and monthly payments that you make, but that is something that you have to work on.
Things to Consider
While debt consolidation does have some advantages to it, it is not the perfect or ideal solution as its promoters are trying to make it out to be. It would reduce down your monthly payment but at the cost of extending the time when you are in debt. You would have to search a lender that gives out a low interest rate and sometimes that can be a frustrating search.
Before you try out debt consolidation you just have to consider a few factors. One of those is whether you have a steady source of income. Debt consolidation simplifies debt management. It does not take away your financial obligations. If you don’t have a regular income then you would not be able to pay even if you consolidate. Another thing to consider is the time that it will take you to pay off your obligations. We have mentioned that debt consolidation might prolong the period you are in debt. Is that acceptable to you?
Debt consolidation is not a cure-all solution. You have to consider it very carefully before you try it out or you might get into trouble.