Consolidating credit card debt pros and cons Free sexchat sign up by credit
The pros and cons of debt settlement and debt consolidation vary, especially with regard to the amount of time it will take to eliminate debts and the impact it will have on your credit score. When used properly, either can help you get out of debt sooner and save money. The prospect of paying less than you owe — far less in some cases — makes debt settlement an enticing choice for eliminating debt.It is also a risky one, a debt relief option so fraught with misunderstanding and negatives that most financial experts would recommend it only as a last resort. You, or a representative negotiating for you, make an offer to your creditor to settle the debt for less than what is owed.Debt consolidation is an effort to combine debts from several creditors, then take out a single loan to pay them all, hopefully at a reduced interest rate and lower monthly payment.This is typically done by consumers trying to keep up with bills for multiple credit cards and other unsecured debts.Most issuers charge a balance transfer fee of around 3%, and some also charge an annual fee.Before you choose a card, calculate whether the interest you save over time will wipe out the cost of the fee.The lender will pay off your credit card bills, and in exchange you’ll enter into a loan agreement with the lender to pay back the money.
That’s the maximum time you’d be required to make payments toward Chapter 13 bankruptcy or a debt management plan — after which your debt would be fully retired.
Options to consolidate your credit card and other debts include a balance transfer credit card, an unsecured personal loan, a home equity loan or line of credit and a 401(k) loan.
The option that best suits you depends on your overall debt load, credit score and history, available cash and other aspects of your financial situation, as well as your self-discipline.
Before you do, let's take a look at the pros and cons of each option.
With a credit card consolidation loan, you work with a lender to combine all of your unsecured debt into one monthly payment.