Is Credit Card Consolidation The Solution You Have Been Looking For?
If you are considering credit card consolidation as an alternative to your increasing
credit card debt you may have asked either of the following common questions:
How do credit card consolidation loans work?
Consolidation loans work by paying off all your credit card debt and providing a single repayment at a lower interest rate than previously experienced with the credit cards that it pays off.
Simple really but here is the downside.
Qualifying for a consolidation loan is not as easy as it used to be with lenders being far more reluctant to help those people who they deem to be of greater financial risk. In other words, unless your credit history is good you may struggle to find a company willing to lend to you.
This is why it is important to act before you encounter any financial problems that may affect your credit score adversely.
Right, let's just say that you have fulfilled all the criteria required by the lender for a successful loan application the next step will be to provide all the necessary accurate debt information so that the lender knows exactly how much money is actually required for your consolidation.
Finally, when this is completed they will lend you the money needed to pay off your creditors and be left with just the one monthly loan payment.
In some cases the lender will insist that they pay off the creditors for you or alternatively they will list on your contract the creditors and the value of each amount to be paid off by you as a condition of the loan.
How do credit card consolidation programs benefit you?
A reduced interest rate is the over-riding benefit of a consolidation program. Credit cards have predominantly high interest rates and charges which means that people are paying a great deal of money each month just to pay off interest alone, sometimes this interest can be as high as 30% which is extortionate.
By lowering your interest rate you can save a great deal of money, consolidation loans will also make managing your debt much easier as you will only have the one loan repayment to worry about each month instead of several high interest repayments to your credit cards.
Consolidating your credit card debt will only work as a debt management measure if you refrain from using your credit cards, if you continue to charge your cards after consolidation you will be in an even worse situation, consolidate your credit cards and then cut them up!