Many individuals with credit card debt often turn to credit card consolidation loans as a way to make repaying their debt easier. Many credit cardholders often have multiple forms of debt, which can be burdensome when multiple monthly payments and interest rates are factored into the equation. However, credit card debt consolidation loans can benefit these cardholders who have multiple debt sources, but there is concern over whether they are in a cardholder’s best interest.
Over the past months unemployment and other economic factors have caused cardholders a great deal of strain and, for many, credit cards have been the only way which they can meet their monthly financial needs. Many individuals have used credit cards to simply keep their head above water and have focused on making minimum monthly payments on these cards so that they can continue to purchase the most basic of necessities.
However, not all credit card debt comes from individuals who have fallen on difficult financial times, as many incur a large amount of credit card debt due to poor financial habits. While there are a variety of ways to deal with debt, credit card consolidation loans often attract more of these cardholders who are in trouble.
Many see a credit card consolidation loan has more beneficial than paying off credit card debt separately due to the fact that multiple interest rates on a variety of credit card debt sources can add up and, many believe, will cost more over the long run. While a credit card consolidation loan can make payments easier, since there will only be one monthly payment required, some financial advisers believe credit card consolidation is a bad plan.
One popular financial advisor who speaks out against credit card consolidation loans is Dave Ramsey. Financial advisers who agree with Mr. Ramsey believes that credit card consolidation loans, while they may be seemingly better for a cardholder, typically end up costing much more over the long run then had the cardholder attacked their debt separately. The thinking behind this is that when one consolidates their credit card debt, even with one interest rate involved, a higher principal amount is attached to the interest rate, a longer repayment timeframe is often involved, and when only minimum monthly payments are made on the consolidation loan the costs can add up.
While dealing with credit card debt has been an issue that many have faced over the past months, there are obviously differing opinions on how one should combat their credit card debt obligations. However, no matter what path the cardholder chooses, it’s often advised that a cardholder sit down, gains stock of how much they owe, the time it will take to repay their debts separately versus with a consolidation loan, and calculate the overall costs that will be incurred. Since every cardholder’s debt situation will be different there will usually be differences in the repayment plans that work best from person to person.
However, one thing is certain, credit card debt has become a major problem in our nation and responsible cardholders who are in the financial position to do so have been making strides to erase their credit card debt and gain control over their finances. While it may not be easy, erasing credit card debt can make an individual’s financial life easier in the present and for years down the road.