Pay Off Credit Card Debts With Loans

One of the social mantras we seem to hear a lot of is the idea of using a loan consolidation to pay off high-interest credit card debt

. While this can sometimes be a good thing, it's not a quick fix that works for everyone and, in most cases, is merely salve on the wound rather than true healing.

Debt Consolidation Loan Benefits

The benefits to Pay off Credit Debt with lower-interest loans are obvious: you get lower interest (which usually means lower overall payments), you make only one payment per month instead of several, and all of this often means the debt can be paid for more quickly. Loan consolidation can offer all of these things.

It can offer them:

Debt Consolidation Loan Pitfalls

That doesn't mean it always does and it definitely doesn't mean you're really out of debt. YOU HAVE JUST MOVED DEBT!!

Paying off credit card debt by getting another loan is merely transferring the debt, not paying it. That's an important thing to remember because that is more often than not the real pitfall with loan consolidation.

Many people have fallen into this trap. Chris Viale, who is the general manager of Cambridge Credit Corp (a non-profit credit counseling agency), says that 70% of Americans who take out a loan to consolidate debt end up with the same or more debt load within 2 years.

In other words, now that the credit cards are clear and the bills are coming in with $0.00 balance on them, card holders begin to see more money available and, rather than spend the extra cash they might have, now that their loans are lower-cost, to more quickly pay those loans, people are instead going deeper into debt.

This is an easy trap to fall into. There are hundreds of justifications people can make to themselves, even with the best of intentions.

Actually paying off credit card debt, rather than getting a new loan and thinking as if your credit cards are paid off, is an important step towards financial solvency. Shuffling debt around is only an interim step that doesn't meet the goal of actually paying the debt off. Putting your home at risk (through equity loans) or other means may not be your best option or in your best interest.

Often, debt consolidation can help make it easier to keep up with your bills and pay off your debt, but it still requires discipline and isn't a quick fix by any means. It's a bandage on the wound, but the debt wound still requires healing. That comes from you, not your credit.

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by: James Harty

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