If you find yourself with multiple credit card balances, making individual payments on several bills every month, each with their own high interest rates, you may have considered a credit card consolidation. It’s important to remember that when you consolidate your credit card debt you are effectively taking out a new loan that could have adverse effects on your credit score. Because of the long term implications, it is highly advisable to contact a credit counselor or Dayton Ohio bankruptcy attorney before signing a new loan agreement.
Good Money After Bad
If you take out a credit card debt consolidation loan, you should pay careful attention to your payments, fees, and interest rate as you could end up paying more by consolidating your debt. Often times, it makes more sense to proactively reach out to your credit card lenders to ask about negotiating your credit card payments first. It isn’t uncommon for credit card companies to lower minimum monthly payments or even your interest rate to help you get back in good standing.
Pros and Cons of Credit Card Debt Consolidation
One of the main things that entices consumers with credit card debt to consolidation loans is the hope of paying off existing debt faster. If you are able to get favorable terms, you may even be able to lower your interest rate and/or lower your monthly bill. Additionally, many consumers find it easier to just pay one bill a month instead of paying several.
On the flip side, come of the debt consolidation companies charge up-front fees which can hurt if you are already struggling with debt. If a company does try to charge you a fee before any work has been done, it’s safe to say that you can avoid these organizations. Another downside to credit card debt consolidation is that you are taking out an additional loan while in debt. This action holds the prospect of landing you even further in debt than what you began with so move forward with caution.
Alternatives to Credit Card Consolidation
There are plenty of alternatives to credit card consolidation loans including, working on paying down the debt on your own by cutting back on expenses and negotiating directly with your credit card lenders. If this step proves to be difficult, you can always relay on the services of a certified debt counselor, who can help guide you in building a budget and repayment plan. A debt counselor may also recommend that you consider filing for Chapter 13 bankruptcy protection if it’s unlikely you’d be able to pay off all your debt in the next 3 years or are facing wage garnishments, lawsuits, or foreclosure. In fact, visiting a trusted bankruptcy attorney first, is probably your best move. During you initial consultation with your bankruptcy lawyer, they will be able to advise you on how to go about relieving your debt, whether it be debt settlement, debt management, debt consultation, or filing for bankruptcy.