Consolidating Credit Card Debt 101: Pros, Cons, And Everything You Want To Know
What are the pros and cons of consolidating credit card debt?
This is a good question. With the recent economic situation in America, many people have been unemployed and are struggling to make minimum payments on their credit card debts. As a result, they have accumulated a lot of credit card debt that they no longer can afford to pay. Consolidation allows them to combine all their debt into one low monthly payment with a much lower interest rate.
There are some cons associated with this process as well. If you find yourself in a situation where you need to start consolidating credit card debt for bad credit, be sure that you do some research on your options.
Finding a good consolidation company
Some consolidation companies charge very high fees and interest rates and do not provide a lot of flexibility or choices when it comes to repayment programs. Other companies will give you a low interest rate, but it might not be enough to cover what you owe.
When you work with a consolidation company, make sure that you fully understand all of their terms and conditions. Make sure that you understand how much of your monthly payment goes towards your principal debt and how much goes towards interest. Do not sign any document if you do not completely understand what is required. If you are going through a serious financial crisis and are struggling to make even minimal payments, you should seriously consider going with a consolidation company.
Once you decide on a consolidation company, you may wish to also work with a credit counselor to help you get your finances back under control. They can be quite helpful in discussing your credit card bills and working out a plan to lower your monthly payments and eliminate up to 30% of your total debt. Using a credit counseling service is often a good alternative to having to file bankruptcy. They can also give you advice on how to avoid future credit card problems and keep your overall debt as low as possible.
Debt consolidation for low credit score
It is important to understand that there are options available to those with low credit scores. Consolidation companies do not always offer the best rates. In fact, some credit card companies actually encourage customers to consolidate their debt because it reduces their risk of defaulting.
That means that they will receive less money if they have to repay a debt. Also, keep in mind that this is only an option for those who can truly afford to pay off their debts without assistance. For people in this situation, consolidation is not the best option.
Balance transfers with low interest credit cards
The best low interest credit cards for balance transfers that are available to consumers are from one of the new entrant’s to the consolidation business. These companies usually charge reasonable rates and some have no minimum monthly payment. They also offer the convenience of one low interest rate with multiple flexible repayment schedules and payment plans. This makes it easier for people to pay their balances off and rebuild their credit scores.
To find the best low interest credit cards for balance transfers, try and get at least three consolidation quotes before making your decision. Do not take the first offer that you are given. Make sure you compare the different offers because rates and fees vary widely between companies.
Look for a company that has been in business for a while and has good, solid statistics. A long-term history of helping people consolidate their debts can go along way in determining which company you wish to work with. The longer the consolidation company has been around, the better.
When you have found the right consolidation company and are working with them, make sure you follow through with your plan to pay off your debt. If you do not follow through, you may find yourself in deep trouble again. Remember, if you do not stay current on your payments the companies are not obligated to offer you more credit. Stay current with all your payments and your credit will be back on the right track in no time at all.