Credit Card Consolidation Loans Basics

Faced with an astounding and ever-increasing level of credit card debt, there are millions of people in this country seeking more manageable ways to deal with these crushing financial obligations. Many of these cash-strapped individuals and families are certainly considering the benefits of a credit card consolidation loan, especially when they have more bills than their budgets can handle. However, while this type of loan may indeed be a viable option, there are many other alternatives to evaluate, and each have their advantages and disadvantages. Every avenue an individual chooses to approach will obviously depend on the extent of their obligations, as well as the financial resources available to them.

Beyond selecting a consolidation loan as an option, there are of course other popular, tried-and-true strategies to accomplish the important goal of getting those bills paid down, or eliminated completely. Among these strategies is the conventional approach of simply paying down the credit card balances based an individual’s own initiatives and budget management. There is also the method of using a balance transfer from a maxed-out credit card to a new account, or perhaps attempting to negotiate with an existing credit card issuer to get the interest rates lowered to a more budget-friendly level.

Beyond these ideas, there are also the debt management or debt settlement plans that are available for consideration, which provide not only debt relief but also assist in promoting more effective financial management abilities for the long-term. In addition, it is also a good idea to not only evaluate your present economic situation but perhaps consult with a financial specialist or credit counseling service to discuss all the options to fit your specific needs. Here are some additional guidelines:

The Credit Card Consolidation Loan Option

A credit card consolidation loan is a method where you negotiate with a specific lending institution to merge all of your credit card obligations into a single monthly payment. They will pay off the balances on all your credit card accounts, and you will then sign a loan agreement to reimburse the funds over time to cover the loan. Of course, for this arrangement to have the most advantage, the plan requires the lowest interest rate possible along with making the lowest monthly payment to come in below the total amount you are currently paying on your existing obligations.

Pros: You would be paying off all of your current obligations immediately, along with gaining the benefits of reduced interest rates and a single monthly payment.

Cons: Many credit card consolidation firms charge preliminary fees to provide their range of services, and it is best to avoid them. Utilize only those that do not. In addition, there are some individuals who wind up deeper in debt by taking on a credit card consolidation loan, so make sure to investigate all aspects of the loan package with the lending institution to determine just how it will work for your situation. The best consolidation plan will assist you with the right procedures to eliminate your debt in the shortest time frame, and provide resources to help you maintain a debt-free budget.

Renegotiate or Restructure Your Debt Option

The obvious alternative strategy to a consolidation loan is when you negotiate directly with each one of your creditors to create a budgetary solution to eliminate all your debt under your own plan. You could elect to substantially lower or pay down your total debts by acquiring either a balance transfer or through renegotiating the interest rates you are currently paying. Either strategy places the management of your financial situation in your own hands, and the results will certainly depend on your financial discipline and how well you can adhere to your budget guideline.

The balance transfer option allows you to move most or all of your credit card debt into one existing card, or preferably, a brand new credit card. The best strategy is to apply for one with a zero-interest introductory offer, which can be found among numerous online resources or even those you receive in your mailbox. By contrast, renegotiating a lower interest rate with all or even a few your creditors will reap much better results for your budget over the long-term, as well as lowering your overall monthly obligations. It may take a bit of work to get these creditors to work with you, so don’t forget to pressure them if necessary by mentioning other more competitive offers available to you.

Pros: You continue to make all the budgetary decisions regarding your payment timetable, choosing exactly which debts to pay first, and what the monthly payments will be. If this process is managed properly, you will eventually develop more effective financial skills to keep your future debts and obligations under control. With either the balance transfer or lower interest rate negotiation option you will eventually pay out far less money in interest over the life of your debt, which works into any budget plan quite favorably.

Cons: In general, a good proportion of individuals do discover how difficult it is to manage their budgets and finances by themselves. If you find you are currently struggling with your debt load, getting out from under can be quite a challenge. It takes a great deal of discipline and restraint, and without assistance, you will certainly require all the necessary dedication to stay on top of it. Without this care and diligence, you may find yourself slipping back into your old spending and charging habits, piling up more debt, and giving up entirely. Those ‘teaser’ rates on the balance transfers need to be watched carefully as well, because if you fail to pay off those balances before the rates expire, the interest rates will jump, and wind up higher than before you made the transfer to the new account. Renegotiating a new interest rate with your creditor successfully will have a lot to do with your previous repayment history and whether you paid these account in full and on time.

Any financial strategy, whether it is credit card consolidation, a temporary personal loan or any of the self-managed repayment methods you decide to take on, your success will certainly depend on the overall scope of your existing financial picture, as well as your current debt obligations. Effectively managing this budget strategy obviously requires being able to afford your current commitments as far as adequate income is concerned, along with the rate of interest on each of your accounts, and what kind of timetable you would like to see all those debts paid off. Whatever plan you choose, don’t hesitate to seek out any of the financial assistance or resources available to accomplish your goal, get our of debt and reestablish a great credit rating.