Credit card consolidation loans allow you to consolidate the debts you owe on different credit cards into a single loan. The benefit is that you now only make the repayment once to the debt consolidation company. It is easier to juggle with a single repayment of the debt consolidation loan rather than having to pay back multiple credit cards with different due dates. It is hard to remember the due dates even when you keep a note of these dates.
Credit card consolidation loans can help in lowering the interest so that you can pay back the loan faster. Some debt consolidation companies only offer the low interest for a certain period of time so you should check with them how long the low interest rate will last. You should also check with them if there is any hidden fee. You should sum up the total debt you owe and the interest charges and other fees that you are currently paying and compare with the total payment that you have to make if you join the debt consolidation loan.
Prior to consolidating your debt, you must make sure that you have the means to repay it after deducting your basic expenses. Besides your basic expenses, you also must remember to set aside some money for your savings. You can only consolidate the balances of unsecured debts. Examples of unsecured debts that people often consolidate are credit cards, and small loans. It won’t work if your debts include secured debts such as parking tickets or unpaid tax.
You will be paying a fixed amount to the debt consolidation company, who will forward the funds to the creditors. Each creditor will get a same portion of funds every month. When one account is paid off, other creditors will get a bigger portions of the payment. You will continue to receive account statement from the creditors when you join the program.
When joining a debt consolidation program, you have to sign an agreement where you agree to close all your credit cards until your debt is fully paid. Continuing to charge you card will add to your debt so that it is not use even if you join the debt consolidation program. You can leave one credit card that has no or very little balance for emergency use. If you are being harassed by debt collection phone calls, getting enrolled into a debt consolidation program can stop all the phone calls. It will give you a peace of mind since you don’t have to get pressured by the debt collection calls anymore.
Joining a debt consolidation program is safer than obtaining a home equity loan. Home equity loan may offer a lower interest rate but your home is at risk. You will have to surrender your home to foreclosure if you neglect to make a repayment on the home equity loan. Debt consolidation is different than debt settlement or filling for bankruptcy because you are pay 100% of your debt. Submitting on time repayment to the debt consolidation company consistently can help to improve your credit score.