|
Bill Consolidation Loan
Should You Consider a
Credit Card Debt Consolidation?
Many people turn to credit card
debt consolidation when they
feel the management of their
credit card debt is getting out
of control. What they typically
do is to transfer or consolidate
all their credit card debt to
one credit card. This
bill consolidation loan
option allows
them to deal with one credit
card statement and one company.
There are some serious pros and
cons about using this type of
credit card debt management
service.
Credit Card Debt Consolidation
Pros
Many companies offer a
twelve-month no interest grace
period where no credit card
interest is charged. This makes
the entire payment applied to
the principal and can quickly
reduce the overall debt.
Besides the no credit card
interest, you will often get a
better interest rate after the
initial twelve-month period.
Therefore, in the short term,
consolidating your credit card
debt can reduce your interest
rate, debt and monthly payment.
However, before you rush to
consolidate your credit card
debt, be aware of the potential
problems.
Credit Card Debt
Consolidation Cons
First, your interest will go up
at the end of the trial period.
For this to be a viable
alternative, you must
consistently pay down your
balance over the grace period.
That means you must get very
serious about overcoming
bad debt management habits. If you don’t, you will pay more
in interest and you will have a
longer pay period. That means
you will increase your debt and
payment time.
Second, read the fine print
under the terms of service
agreement. Look for the section
about payment default. This
section usually discusses three
things: 1) what happens if you
make a payment late, 2) what
happens if a payment doesn’t
process (go through) correctly
and 3) what happens if you go
over your line of credit.
In
most instances, your interest
free grace period is cancelled
when one of these three problems
occurs. That means the interest
rate you expected to get after
the twelve-month period is
immediately applied. Your
interest free trial period is
over.
In
addition to the cancellation of
your free interest, the interest
rate that is applied is usually
much higher than the rate you
would have gotten after the
twelve-month period. In fact,
it will probably be higher than
any interest rate you had on any
of your credit cards prior to
consolidating your debt.
So, if you are considering
credit card debt consolidation,
be careful. Read the terms of
service very carefully.
Remember, you must make the
payments on time. Learning good
credit management skills and
using this is critical. You must pay
down your balance during the
grace period or you will be
worse off than you were before
you entered into your credit
card debt management service.
Editors Choice:
Lending Tree
Mortgage Refinance Loan
 |
