Comparing Costs On Consolidating Credit Card Debts With A Personal Loan–Why Some Financial Counselors Stress Alternatives

When it comes to paying off credit card debts, some consumers feel that consolidating will be the best option, particularly when they use a personal loan due to the fact that they may be able to get a lower interest rate, and in some cases, the monthly payments on the loan may be more affordable than credit card minimum monthly payment options, which may cause overall cost to increase. However, there are financial counselors that stress alternatives to consolidation when it comes to addressing credit card debt specifically, simply because interest rates on loans or credit cards will cause these overall costs to be much higher in the long run if a consumer only makes minimum payments rather than addressing debt in a more drastic way.

In some cases, homeowners are looking for personal loans to address what they feel to be an out-of-control situation, particularly when multiple credit card debts are in place. Currently, homeowners may be able to get certain types of loans, like a home equity line of credit, in the upper 4% range, but it has also been the case that some counselors and financial advisers feel this will not be a homeowner’s best financial option, despite the fact that they may be getting a lower rate on their debt.

While some consumers may be able to get an unsecured personal loan to consolidate their debts, while others will use their home’s equity to address credit card debt issues, consumers are urged to look at a variety of factors within these repayment plans so that they can better make an informed decision as to what payment method will be best for their situation as each consumer’s financial position may benefit more or less from consolidation and alternative repayment plans on their credit cards.

Some consumers in the past month have used credit card balance transfers to consolidate other credit card debts, while some do continue to stick to these loans, but some people have been able to budget in such a way that allows them to address their credit card debts more quickly and at less cost than a loan would offer. Yet, with unemployment being at around 9.1% nationally, some consumers are seeing a drastic changes in their financial position and income, which may lead consumers to opt for a consolidation loan simply for the lower monthly payments but are not necessarily looking at the overall costs.

When it comes to consolidation loans though, many advisers often warn against using a homeowner’s equity due to the fact that this could create a problematic situation if a homeowner cannot meet this higher mortgage debt, as they could lose their home as a result of this particular debt consolidation option. In some cases there are personal loans available to address credit card debt, but consumers may also be able to either figure out a payment plan or speak with a credit counselor to help them formulate a plan to address their credit card debt separately. Yet, no matter what route the consumer chooses, be it a consolidation or paying off debts separately, understanding the pros and cons of both debt consolidation and these alternative repayment plans, coupled with the fact that a consumer needs to look at why they are pursuing these credit card debt relief programs, are few aspects of this particular repayment strategy that officials say consumers need to factor into their decision so that they can pay off their credit cards as quickly and affordably as possible.