Is Credit Card Consolidation a Solution for You?
When you have multiple credit card debts, the best way to settle these balances is through debt consolidation. Consolidating credit card bills can be done in three options – through credit consolidation program, do-it-yourself consolidation and through consolidation loan. All these debt solutions have pros and cons so before applying one, make sure that you completely understand its process.
1. Credit card consolidation programs – This is done by a third party debt relief agency wherein a debt consultant works or negotiates to your creditors so you can get lower interest rates and then a repayment plan is created. With the help of a consolidation agency, you will enjoy the following benefits:
- Your credit card bills will have lower interest rates.
- Consolidation of your credit card debts is performed by a financial expert so no more harassment and frequent calls from your creditors or collection agents.
- Your consultant can negotiate with your creditors to reduce or waive other charges such as late payments or over-limit penalties.
When you signed for a debt consolidation program, you will no longer have to deal with several creditors. You will only have to deal with one payment each month to your debt relief company who will send the payment to your creditors or collection agent.
2. Do-it-yourself credit card debt consolidation – In this method, you have to combine all your balances to just one account with the least interest rate and the lowest transfer charges. Then, each month you need to make a payment to the account. Just, be careful when you do it yourself because making defaults on your payment can severely damage your credit score. In addition, you must not close your other accounts even if you have transferred your balances.
3. Getting a consolidation loan – This can be the quickest way to pay your credit card debts. In this option, you will have to file for a consolidation loan to your chosen debt consolidation agency. Once your loan is approved, you can use the money to pay off all your credit card balances. However, this option is not for everybody because your loan application is still affected by your credit score. So, if your FICO score is very low, you are unlikely to avail it.
If you think you cannot do it on your own, getting the help of a financial expert is recommended. However, when you search for the right debt consolidation agency, observe the following aspects:
- Excellent reputation in terms of services
- Legitimate and rated by the BBB or Better Business Bureau
- Has good reviews from previous customers
Consolidating credit card bills can be done comfortably if you know what you need and you deal with the right agency.
One thing to keep in mind is that depending on the interest rates, if used properly credit cards can be a superior solution to payday loans, as they are lower interest and also unsecured loans.