Credit card consolidation is the act of taking all the debts you owe from all of your credit cards and then paying them off using a single loan. Credit card consolidation can either be done thru one of your existing credit card companies or thru other banking or lending institutions. This article will provide you with basic information regarding credit card consolidation, why it works, advantages, other alternatives in paying off debt as well as tips and techniques to ensure you do not get back into debt.
How It Works
Some credit card companies offer to consolidate all your debts by requiring you to take out a single loan that is enough to answer for the entire amount of your indebtedness. When the loan is taken out it is automatically applied to all the debts included in the consolidation plan. You will then be fully paid on all your debts and your account made current. The only payment left is the payment of the consolidation loan which is usually payable on monthly installments. While these offers are very helpful, make sure to shop around for other lenders for better deals. Take special note of lenders who are not only willing to consolidate but are also willing to negotiate the amount of indebtedness with each lender, if none are amenable then do it yourself.
Why it Works
Credit card consolidation works because the one of the most flexible creditors are credit card companies. This is because they know that a significant amount of the debt constitutes interests as well as penalties. The alternative to a discounted payment is nonpayment so they will be willing to negotiate. All it takes is proper negotiations and a viable option presented to the credit card company. The advantages of debt consolidation are the following:
- You get to wipe out all your debts from different creditors in an instant.
- You may even be able to lower the total amount of the debt.
- Your credit rating improves.
- You get peace of mind.
Alternatives to Consolidation
Individuals who do not choose to consolidate their debts may use other alternatives like paying in lump sum, paying each creditor one by one or disregarding the debt. These alternatives may present its own advantages but most financial analysts believe that a properly negotiated and consolidated loan with an individual that has both financial capacity and willingness to pay is more effective, viable and realistic to the average consumer.
Tips and Techniques
Let us assume you are already willing to consolidate. Here are a few tips and techniques to make sure that you get the best consolidation plan possible:
- Perform proper research and then go out and meet several lenders to ensure that you get the best deal possible
- Require that the debt be negotiated and at the very least, the interests as well as penalties must be absolutely waived by each and every creditor.
- Take an active part in the negotiation process if no lender is willing to do it for you.
- Read the contract before signing to make sure you agree 100% with the entire negotiation and consolidation contract.