subject: Credit Card Debt Consolidation Can Help To Reduce Debt Fast [print this page] Credit Card Debt Consolidation Can Help To Reduce Debt Fast
Credit card debt consolidation is a highly popular debt reduction method. Unlike other debt relief methodologies, credit card debt consolidation does not require the debtor having to miss their repayments, which means that the debtor is unlikely to have their credit score downgraded. However, while credit card debt consolidation has great positive points, it does have some noticeable downsides which require due consideration prior to embarking upon a credit card debt consolidation plan.
The Advantages of Credit Card Debt Consolidation
Credit card debt consolidation plans require the debtor joining a Debt Management Plan or DMP as it is more commonly known. The debt management company negotiates with their clients creditors with the aim been to reduce interest rates and fees.
So, for example if a credit card debtor has say 4 credit cards with an average debt interest rate of 19%, by the end of the negotiation process this rate may well be brought down to a more reasonable figure such as maybe 11% or 12%. This interest rate downgrading brings about a reduced monthly payments and a shorter payback timeframe.
Furthermore, with debt consolidation, it has the added advantage of having no any risks attached such as credit rating downgrading or court cases.
Also, credit card debt consolidation fairs well against the option of taking out a credit card debt consolidation loan. These loans apparently reduce the monthly payback amounts, just like a DMP. However, they have one noticeable difference, in that they are loans. So if you default on your credit card debt consolidation loan it results in a bad credit rating; whereas if you decide to leave the DMP, there is no negative downside, because you simply pay a monthly maintenance fee for as long as you are participating in the program.
Furthermore, many credit card debtors default on debt consolidation loans, because of the ease with which these loans can be acquired. It must be remembered that credit card debt consolidation, to be truly effective as a means of debt reduction, requires the debtor to bear in mind the implications of the debt relief program.
This is where a credit card debt consolidation plan is superior to a credit card debt consolidation loan; because at least with a credit card debt consolidation program, the debtor is aware that they have a debt problem and that they need to make substantial lifestyle changes in order to recover from it. Whereas with a debt consolidation loan, it is all too easy for the debtor to forget that they have a debt problem. Until of course the credit card debts begin to rack up once again, at which stage they now have lots of credit card debts, as well a credit card debt consolidation loan to maintenance.
The Disadvantages of Credit Card Debt Consolidation
Credit card debt consolidation has several negative points. The most noticeable one is the trusting of ones money to an external agency, because the credit card debtor has to entrust their money to a debt relief company who disperses the monthly payments to the debtors various creditors.
While this is fine, it is only good so long as the debt relief organization pays the debtor"s credit card bills on time and which charges fair fees for their services. While most debt relief companies provide a good service, it is vitally important that the debtor make sure that they have selected the right company and that the fees are set at an appropriate rate.
Finally, the DMP is an on-going process, so it is vital to monitor the process on a monthly basis. Because in some cases the debt reduction company will be sloppy with making payments and this could result in a downgrading of your credit rating, if you are not careful.
A final potential downside, of a credit card debt consolidation program, is that it requires the debtor to pay out on a monthly basis. This is only good if the debtor can afford to make those monthly payments. And this is an important clarification point between credit card debt consolidations versus more radical debt reduction methodologies.
Credit card debt consolidation allows the debtor to reduce their payments without endangering their credit rating. However, it does require that the debtor make monthly payments, even if they are at a reduced rate. If this is the case with you then fine, however, if even reduced rates are beyond your ability to pay, then you would be better off considering either credit card debt settlement or bankruptcy.
This is an important point, because if a debtor joins a credit card debt relief program without taking into consideration their ability to make the repayments, they might end up defaulting, which brings them right back to square one again.
Is a Credit Card Debt Consolidation
Program the Best Debt Relief Option for You?
Credit card debt consolidation is a great debt relief option, which has many advantages over and above either credit card debt settlement or bankruptcy; however it does come with some downsides. For credit card debt consolidation to work effectively, the debtor has to make sure that the debt reduction plan is a viable option for them in the first place, and they must ensure that they pick the right DMP provider; and finally they must overview the credit card debt consolidation process, on a monthly basis, in order to make sure it is run efficiently.
If you have taken the time out to do the due diligence and have come to the conclusion that credit card debt consolidation is the best debt relief vehicle for your needs, then go ahead and take the plunge. Because when properly handled credit card debt consolidation can be a highly effective debt reduction option.
