Credit Card Consolidation Versus Debt Payment Business

Whether To Use Credit Card Consolidation
Or A Debt Payment Business

Go Straight To List of Recommended:
Debt Payment Companies

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Credit Card Consolidation Versus Debt Payment Business

This article will help you decide which type of debt solution is likely to work better for your particular situation. When you have credit card debt it is important to get help with resolving the problem, otherwise it is likely to get steadily worse. Even if you can avoid taking on any new debt, your current debt will almost certainly continue to grow unless you directly address the situation.

I will go through the pros and cons of credit card consolidation versus using a debt payment business. By debt payment business I primarily mean a debt management company. For very serious credit card debt you should refer to the Debt Settlement page (for US residents) or the IVA page (for UK residents).

Credit Card Consolidation Using A Consolidation Loan

Consolidation of credit card debt can be achieved in different ways. The type of credit card consolidation I want to look at is the use of a new loan to consolidate lots of different credit cards. This is a very commonly used approach, but must be used with caution as it is often not as effective as some people think.

People are tempted by the idea of a credit card consolidation loan because it promises to get rid of all their old debts, leaving them just one, more affordable monthly payment. The idea is that you take out one big loan to pay off all your debts. The new monthly payment for the loan is usually less than the total of your old debts would have been. This looks like a good deal on the face of it, but some people look no further than this, which can be a big mistake.

Lower Monthly Payments Versus Higher Long Term Costs

What you must consider when thinking of using a credit card consolidation loan instead of a debt payment business is the total amount that you are going to be repaying. Quite often the reason for a reduced monthly payment is that the loan is over a longer period so you carry on paying the debts off for much longer. While you feel the immediate benefit of paying a bit less out each month, you end up paying far more in the long term.

Simplicity Versus Increased Cost

The other thing to watch out for with credit card consolidation is which debts you use the loan to pay off. It is natural to want to get rid of all your debts and have just a single payment to think about. This makes keeping track on your debt so much easier and is a primary benefit of consolidation, but it can come at a cost if you are not careful about how you approach consolidation.

If you take out a loan big enough to pay off all your debts, you may inadvertently be swapping some cheap debts for more expensive ones. Some credit card interest rates are very high, and it would be sensible to pay them off with a loan at a lower rate of interest, but there are also some good deals on some credit cards, even if they are short term. You would not want to pay off a card with a 0% offer using a loan that you have to pay interest on.

So you should make sure you know the interest rate you are paying on each credit card and make a list of them. Put them in order of their interest rates, with the highest at the top and lowest at the bottom. When you know what the interest rate on the proposed consolidation loan will be, draw a line through your list to correspond with that rate, and only consolidate those cards above the line.

Credit Card Consolidation Using A Debt Payment Business

The alternative way to deal with credit card debt is to use a debt payment business, such as a debt management company. The process you will go through with a debt payment business is also known as debt consolidation, but it does not involve borrowing any money.

For most people, looking at credit card consolidation versus a debt payment business usually results in going for the payment plan. This is because it is less risky as it does not involve taking on new debt, and it is far more likely to be an appropriate solution for the majority of credit card debt problems.

What a debt payment business does is negotiate with your creditors to change the terms for paying back your debts, which will normally result in paying less in interest and perhaps freezing or reducing other charges too. This makes it possible for the amount due each month to your creditors to be reduced. Instead of having to keep track on all your different debts, you just make one, more affordable payment to the debt payment business instead.

When considering credit card consolidation versus a debt payment business, you should remember that a payment plan is an informal agreement that you can change or get out of if your circumstances should change. A loan on the other hand is a fixed agreement and you are committed to the payments for the full term of the loan.

Finding A Reputable Debt Payment Business

One of the most important decisions you can make when seeking debt help is finding a company you can trust to give you honest and reliable advice. Finding a suitable debt payment business is no different to shopping for any other kind of service. In other words, it pays to shop around. It is very easy to apply to a few different debt payment businesses and compare one offer versus another.

All the best companies have simple online forms that make it very easy to apply. It is advisable to stick only to companies known to be well established and which have a good track record of success. Apply to a few of these and compare the proposals and advice you receive. You can find a list of some of the best debt payment businesses in the UK and the US on this site using the link below:

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Credit Card Consolidation

Versus Debt Payment Business

Whether To Use Credit Card ConsolidationOr A Debt Payment Business

Go Straight To List of Recommended:Debt Payment Companies

See Also: Advice On Debt Consolidation Loans

Box Links to Pages

Credit Card Consolidation Versus Debt Payment Business

Credit Card Consolidation Using A Consolidation Loan

Lower Monthly Payments Versus Higher Long Term Costs

Simplicity Versus Increased Cost

Credit Card Consolidation Using A Debt Payment Business

Finding A Reputable Debt Payment Business

Go To The List Of Recommended Debt Management Companies

Apply For UK Debt Help Now

Whether To Use Credit Card Consolidation
Or A Debt Payment Business

Go Straight To List of Recommended:
Debt Payment Companies