In the current consumer society characterized by poor economies and high costs of living, most people find themselves taking several short term unsecured loans. According to statistical reports, many of these unsecured loans are in the form of credit card debts.
Just like many other people, you may find yourself struggling with your bills and other debts and looking for a way out. Though there are many debt management options in the market, you may have to opt for debt consolidation. With debt consolidation, all your credit card debts will be consolidated into one manageable loan. The main reasons why you should consider consolidating your credit card debts include:
- High interest rates on existing credit cards
Most credit cards attract very high interest rates and this becomes very costly for you. Since most of your credit cards attract high interest rates, consolidating your debts into one loan with a possibly lower interest rate will make it easier for you to pay off your debts. This also means that you will be able to save up a little extra money.
- Consolidating the credit card debts into a personal loan
Most of us find ourselves deep in debt because of our poor spending habits. Unfortunately, you may be struggling with the debts a lot harder and you may have accumulated too many debts. To manage your debts, you may opt for debt consolidation where all your credit card balances will be converted into a personal loan that can be repaid monthly. The loans come with lower interest rates and there aren’t that many penalties.
- Bad credit
Despite the convenience afforded to us by credit cards, these cards make people their slaves and in some way, you find yourself deep in debt and getting out of the debt is tough. As you accumulate more debt, you will get to a point where you are unable to repay your monthly repayments. Consequently, you have poor credit and a debt consolidation loan will be the best way out for you. You should however note that the loan will attract a relatively higher interest rate because of your poor credit standing.
- Annual fees
This is quite the bummer. As long as you have an active credit card, you will have to pay the annual fees. These fees are normally high and if you have more than one credit card, then you know that the fees will be significantly high. Consolidating your loans into one loan means that you deal with one credit card debt and less annual fees. Before signing the consolidation forms, ensure that there aren’t any hidden fees or higher interest rates on the new card.
- You get paid to consolidate
Well, despite your high interest rates and several accumulated debts, the credit card issuers are in business and there is competition in the market. To keep you with them, most credit card companies allow you to accumulate all your credit card debts into one with zero interest for a specified duration. This is perfect if you know that you will be able to repay all your debts within that time.
In conclusion, debt consolidation gives you a good financial management system and it makes bills and debts manageable. However, it will only work if you change your spending habits and not reload the debts.
Claire Logan is a debt consolidation loan expert and a renowned credit counsellor. When not working, she enjoys reading, swimming, and travelling. Check out her LinkedIn profile for more on debt consolidation and credit card debt management.