Consolidating credit card debt through either the use of a personal loan or a credit card balance transfer opportunity has offered some consumers the option to find more affordable monthly payments on multiple credit card debts when these obligations may be problematic, but consumers are still being cautioned against entering into a consolidation agreement before considering not only the benefits but downsides to credit card consolidation as well.
The benefits of consolidating credit card debt are obvious in that, for consumers having trouble making payments, there may be more affordable monthly obligations offered through a personal loan then multiple credit card debts. Also, some consumers may find that they get a lower interest rate on a personal loan used for credit card consolidation and, when compared to interest rates being paid on multiple cards, this could also be more affordable in some instances.
An article on Bankrate.com mentions that consumers who are usually looking for consolidation options on their debt obligations through credit cards typically are looking for a lower interest rate, to lock in a payment, to lower a payment, or to increase the availability of credit they may have if they have maxed out their credit. Understandably, consumers who are able to get a personal loan and are in a good position financially may get a low interest rate on the loan, can find that the payments on a personal loan are fixed and, again, can be more affordable, but there are some consumers who will consolidate credit card debt through the use of a personal loan so that they can free up their credit cards for other purchases.
However, these aspects of credit card debt consolidation can be helpful in some ways, but they do also provide a breeding ground for financial trouble down the road. Consumers who are looking to simply get a more affordable rate and monthly payment will, in many cases, find that consolidation through either a personal loan or a credit card balance transfer opportunity can offer more affordability, but there are some things that consumers must look out for when using this method. Consolidation loans can cause overall costs to increase due to the fact that they will take longer to repay, in most cases, and if an affordable payment is offered, this could cause consumers to face a longer period of repayment and higher overall interest costs.
Also, specifically concerning debt consolidations from balance transfer credit cards, there may be fees associated with transferring balances from other credit cards to one particular balance transfer card and consumers who may be able to get little or no interest up front on this type of consolidation have to be in a position where they can erase this debt fast so that when the introductory interest rate period ends, they will not be left paying on these debts associated with a much higher rate.
Yet, when it comes to consolidating debts through the use of loans or credit cards simply to free up credit on other cards, this can be a bad decision for consumers as acquiring more debt than one can repay, maxing out credit cards, or consolidating debt only to acquire more debt on other cards are all simply poor financial practices. Typically, consumers that have benefited from consolidating credit card debt are those who may be able to pay off this consolidation loan quickly, which would lead to lower costs with their interest rate payments, or in some cases, consumers who may run the risk of missing payments on their credit cards due to financial troubles may be willing to settle for higher overall costs, when interest is factored in, as long as they can get an affordable payment that will allow them to avoid missing payments associated with these obligations.