As all those who have already owned credit cards will attest, card debt can increase at a surprising rate. It only takes a few months of missed payments to create a card balance that is almost too difficult to manage. But when that happens, there is a solution. A debt consolidation loan can settle everything in one payment.
The challenge of clearing unsecured credit card debt is difficult, the slightest delay increasing the scope of the commitment. With an average American professional with up to 4 credit cards, this can mean a total debt of $ 20,000 to $ 40,000
The only real solution is to swiftly clear the debt so that there is no room for further delays. But is a debt consolidation program really the most effective solution to the problem?
The nature of credit card debt
Credit cards are an essential tool for all of us. Although we do not like weekly shopping and luxury spending, we use the cards to book airline tickets, hotel rooms and cheap stores. The problem is that it is only a matter of time before a debt consolidation loan is needed to deal with the consequences of using the card.
Of course, clearing unsecured credit card debt is not cheap, but the benefit of using a single loan amount to do this is that the immediate debt is gone and the replacement debt is easier to manage. For example, a $ 10,000 loan can be repaid over 3 years at a cost well below the month that the minimum payment the card company would have requested.
However, if a debt consolidation program seems ideal for dealing with credit cards, only personal discipline can control any future activity related to cards and prevent a similar situation from developing.
Adding the benefit of consolidation
Of course, the settlement of a debt is not limited to alleviating the immediate financial pressure. Getting a debt consolidation loan has several positive aspects, the repayment potential of which goes beyond the existing credit card debt, which means that the financial situation can be completely improved.
When a debt is paid, it is recorded in your credit report and the credit score is adjusted. This means that by settling unsecured credit card debt, your future loan terms can be significantly improved. This includes a lower interest rate and a high loan limit.
In addition, by redeeming existing debt and replacing it with a more manageable debt structure, additional liquidity is actually released. This is especially true when the debt consolidation program has a longer loan term, with monthly repayments often representing 50% of the sum of the initial repayments.
Debt consolidation companies
There are two ways to secure a debt consolidation loan. The most obvious is to contact a lender – traditional or online – and apply for a loan for the specific purpose of repaying existing debts. As a rule, lenders are willing to make arrangements, but the loan amount is usually limited, a fine of up to $ 30,000 is acceptable.
For larger debts, it is wise to go to a debt consolidation company. These companies take care of the smallest details and sometimes negotiate discounts with creditors. In addition, clearing unsecured credit card debt represents only a portion of the total amount covered, with personal loan and mortgage included, if desired.
The repayments are made to the company, which adds fees for its services and, in some cases, the debt consolidation program virtually controls the expenses until the debt is cleared. However, the debt is cleared and that is the starting point in the first place.