Credit card debt consolidation can be a suitable option for you if you are struggling to manage and pay off your multiple credit cards. You can consolidate your unsecured debts on your own with the help of the balance transfer method, take out a personal/consolidation loan or get help from a consolidation company. Regardless of the option you choose, there are certain advantages of consolidating your credit card debts, which are discussed in the following lines.
Single monthly payment – You need to make a single monthly payment irrespective of the consolidation option you opt for. So, you just need to remember the date by which you need to make the due payment, either to the consolidation company or to your new creditor (if you take out a consolidation loan), or to the existing/new creditor if you opt for balance transfer method.
Reduction in interest rates – If you take out a personal loan, the interest rate should be less than the sum total of your existing credit card interest rates; otherwise, it’s of no use paying back existing debts with the new loan. In case of a consolidation program, the company negotiates with your creditors to reduce the interest rates on your credit cards and if you opt for balance transfer method, then you transfer your existing balances to the lowest interest rate card or take out a zero or low interest balance transfer card for consolidating existing unsecured bills.
Better financial management – It is always easier to manage a single monthly payment instead of making multiple payments every month. So, it helps you to focus on other areas of your personal financial management. If you get help from a consolidation company, then you just have to make the single monthly payment and every other thing is managed by the company. So, you can stop worrying about paying back your debts and can concentrate on how to save more money for better financial management.
Creditor/collection calls usually stop – Consolidation can help you reduce or stop harassing creditor/collection calls. When you opt for balance transfer, all your creditor expect one get back the owed amount, so they stop bothering you. If you take out a loan, your existing debts are paid off and if you opt for a consolidation program, the consolidation company informs your creditors that you’re paying off with professional help; so, they stop bothering you once they get the first payment.
Credit score gets increased – Your credit score is likely to increase after you pay back all your debts as the account statuses will get updated as “Paid in full”. It is also a positive thing for your future creditors as they’ll understand that you tried and paid back your debts in full.
You can discuss and compare consolidation loans and programs along with balance transfer method, with a financial adviser to know which option will suit you the best. You can also seek help from online debt forums in order to discuss with others and decide your consolidation option. However, regardless of the consolidation option you choose, you need to be very disciplined regarding managing your personal finance so that you’re able to save a considerable amount to repay your debts and improve your financial status.