According to the latest reports from the financial sector, 70 percent of Americans have credit cards. Along those same lines, most families with credit cards are also living with credit card debt. Since credit cards often come with high interest rates, those with more than one card are the most likely to suffer from the all-too-common minimum payment syndrome. With this in mind, many are considering an alternative.
Debt consolidation entails using a loan to pay off other debts. This leaves those taking advantage of this solution with a single monthly payment rather than multiple ones. Under the right circumstances, it can also save a great deal of money over the long term by reducing interest rates and eliminating interest accrual. That being said, it’s important to weigh all the factors before jumping into a venture like this.
What to Consider
It’s possible to borrow money from debt consolidation companies, but loans specifically for this purpose are sometimes difficult to come by. Personal, general-use versions like those available from Maxlend Loans are often viable alternatives. Still, certain aspects do come into play.
- Interest Rates: One of the main goals with debt consolidation is to benefit from lower interest rates. Be sure the loans at your disposal don’t have higher rates than your credit cards.
- Terms: If you’d spend longer paying off a personal loan than you would paying down those credit card balances, borrowing money may not be the best option. Longer terms typically translate into more interest, so paying as much as possible on the credit cards each month might be the better solution.
- Types of Debt: Most families using debt consolidation have multiple credit cards as well as numerous other burdensome expenses, like home and auto loans, store charge accounts, and student loans. In the event a single credit card with a relatively low running balance is your only woe, you may not need a loan at all.
Not all debt is negative. In fact, keeping an open line of credit or two actually has a positive impact on credit and future borrowing capabilities. Overbearing debt, though, does warrant a solution. Consolidation may very well be the answer, but keep these factors in mind when making a final decision.