As anyone who has ever owned credit cards can attest, card debt can add up with astonishing speed. It only takes a few months of late payments to create a card balance that’s almost too much to handle. But when it happens, there is a solution. A debt consolidation loan can erase it all in one payment.
The challenge of paying off unsecured credit card debt is certainly a difficult one, and the slightest delay increases the reach of the undertaking. With the average American professional owning up to 4 credit cards, that can mean $20,000-$40,000 in total debt.
The only real solution is to pay off the debt quickly, so as not to leave room for further delay. But is a debt consolidation program really the most effective solution to the problem?
The nature of credit card debt
Credit cards are an essential tool for all of us. Even if we’re not much of a fan of weekly shopping and lavish spending, we use cards to book cheaper airfare, hotel rooms, and online shopping. The problem is that it is only a matter of time before a debt consolidation loan is needed to deal with the consequences of using the card.
Of course, paying off unsecured credit card debt isn’t cheap, but the advantage of using a single loan amount to do it is that the immediate debt disappears and replacement debt is easier to manage. For example, a $10,000 loan can be paid off in 3 years for much less per month than the minimum payment the card company would have required.
However, while a debt consolidation program seems ideal for managing credit cards, only personal discipline can keep any future card activity in check and prevent a similar situation from developing.
Additional Consolidation Advantage
Of course, paying off debt involves more than just relieving immediate financial pressure. There are several positives to getting a debt consolidation loan, with the potential to pay off more than just your existing credit card debt, meaning your financial situation can be improved entirely.
When any debt is paid off, it is recorded on your credit record and your credit score is adjusted. This means that by paying off your unsecured credit card debt, the future terms of your loan can be greatly improved. This includes a lower interest rate and a high loan limit.
Also, by buying existing debt and replacing it with a more manageable debt structure, you actually free up extra money. This is especially true when the terms of the debt consolidation program include a longer loan term, with monthly payments often being 50% of the combined original payments.
debt consolidation companies
There are two ways to secure a debt consolidation loan. The most obvious is to approach a lender, either traditional or online, and apply for a loan for the specific purpose of paying off existing debts. Lenders are generally happy to accommodate, but the loan amount is usually limited, so up to $30,000 is fine.
For larger debts, it’s a good idea to approach a debt consolidation company. These companies take care of the smaller details involved and sometimes negotiate reductions with creditors. Plus, unsecured credit card debt settlement is only a part of the total amount covered, including personal loans and mortgages, if you choose.
Repayments are made to the company, which adds a fee for their services, and in some cases the debt consolidation program virtually controls spending until the debt is paid off. However, the debt is settled and that is the welcome point in the first place.