Credit Card Debt Consolidation Loans – Two Key Points To Remember
February 3, 2011 by Admin
Filed under Credit Cards Debt Consolidation
Copyright (c) 2010 Mike Adams
Credit card debt consolidation loans can be a first step to get rid of mounting debt. They let you consolidate all of your higher interest card balances into one lower interest loan. You apply for them through a bank or other financial institution. Like most loans, consolidation loans are then paid back in monthly installment payments.
Instead of debt consolidation loans some people simply transfer their balance to a different card. Credit card companies have been actively promoting balance transfers for years, so often people are more familiar with this than they are with debt consolidation loans. But actually, a debt consolidation loan can be a far better way to manage your growing credit card debt as long as you remember two important things: Don't put your home at risk and don't put yourself in a worse position.
Don't Put Your Home At Risk
Credit card debt consolidation loans are normally unsecured loans. That means you don't have to put up anything for collateral as security on the loan. But if you have really bad credit, you might have to take out a secured loan instead to consolidate your debt. Secured loans require you to pledge something, such as your house, as collateral for security on the loan.
This can be a huge risk. Don't put your house up as security on a debt consolidation loan unless you are absolutely sure you will be able to make all of the payments no matter what happens. And how can you ever be sure of that?
Don't Put Yourself In A Worse Position
Credit card debt consolidation loans basically do the same thing as a credit card balance transfer. But the difference is that they can eliminate credit cards by allowing you to move your debt from high interest cards to a lower interest loan. This eliminates your card balances, theoretically allowing you to eliminate your credit cards as well.
One of the biggest mistakes people make right after getting a credit card debt consolidation loan, though, is to run their credit card balances back up again. This is a huge mistake, as they wind up with a new loan payment plus all of their card balances again. They wind up in debt twice as bad!
Although credit card debt consolidation loans and balance transfers have the same objective, lower interest, debt consolidation loans are better as long as you remember these two key points.
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