Is Consolidating Credit Card Debt a Good Idea?
If your credit card bills are weighing you down, you may have thought of the option to consolidate credit card debt and wondered if this is a good idea. This type of service has worked for some people with positive results whereas others have had regrets doing so. Like any other financial deal, it has its advantages and disadvantages. Let’s look at what these are so you will arrive at a wise decision if you do decide you want to consolidation of your credit card debts.
One advantage when you consolidate debt is having a more organized billing system and paying a lesser amount each month. Having many credit cards and receiving just as many billing statements can give you an overwhelming feeling and there is a tendency to overlook one or two by mistake.
The decision to consolidate credit card debt will mean only one bill to pay and chances of missing some are less likely. Also, paying on time will save you late fee penalties and charges for not paying on time. There is a sense of achievement when credit cards get paid on time and an easing of stress when you know you are not in debt.
The upside when you do consolidate your debts is that you end up spending less money in general because the consolidation agency usually negotiates with the banks and lenders for a lower interest rate and the savings they get is passed on to you.
However, there is a disadvantage too when your debts are consolidated. A consolidation loan that appears on your credit report as a charge-off can negatively affect your credit rating. But some people couldn’t care less about credit ratings. What they want is to actually pay off their debts. So this is an individual decision based on each person’s feelings and preference. A
nother downside to this scheme is that not all your loans may be included when you chose the debt consolidation option. Banks and lenders are not legally obligated to work with consolidators and some choose not to. This simply means that you will probably still be left with some other cards and bills to pay.
One important matter to keep in mind is that when you consolidate credit card debt, this is also a loan and paying it is an obligation. If spending is something you can’t control, or if it has brought you into serious financial trouble, you need to resolve the problem no matter what alternative you pick. Your credit card debt may be gone but you are backwards in your payment of your consolidation loan. Or you might have gotten new credit cards and loans which has put you deeper into a financial quagmire.
When you decide to consolidate your card debts, you are just shifting your financial obligations to another more efficient channel. But the responsibility of paying for it remains. Look at your decision as a way to get back on good ground, not back in trouble.
One advantage when you consolidate debt is having a more organized billing system and paying a lesser amount each month. Having many credit cards and receiving just as many billing statements can give you an overwhelming feeling and there is a tendency to overlook one or two by mistake.
The decision to consolidate credit card debt will mean only one bill to pay and chances of missing some are less likely. Also, paying on time will save you late fee penalties and charges for not paying on time. There is a sense of achievement when credit cards get paid on time and an easing of stress when you know you are not in debt.
The upside when you do consolidate your debts is that you end up spending less money in general because the consolidation agency usually negotiates with the banks and lenders for a lower interest rate and the savings they get is passed on to you.
However, there is a disadvantage too when your debts are consolidated. A consolidation loan that appears on your credit report as a charge-off can negatively affect your credit rating. But some people couldn’t care less about credit ratings. What they want is to actually pay off their debts. So this is an individual decision based on each person’s feelings and preference. A
nother downside to this scheme is that not all your loans may be included when you chose the debt consolidation option. Banks and lenders are not legally obligated to work with consolidators and some choose not to. This simply means that you will probably still be left with some other cards and bills to pay.
One important matter to keep in mind is that when you consolidate credit card debt, this is also a loan and paying it is an obligation. If spending is something you can’t control, or if it has brought you into serious financial trouble, you need to resolve the problem no matter what alternative you pick. Your credit card debt may be gone but you are backwards in your payment of your consolidation loan. Or you might have gotten new credit cards and loans which has put you deeper into a financial quagmire.
When you decide to consolidate your card debts, you are just shifting your financial obligations to another more efficient channel. But the responsibility of paying for it remains. Look at your decision as a way to get back on good ground, not back in trouble.