Are Consolidation Loans The Best Debt Relief Option?

Financial Info

Millions of people today are carrying credit card balances over from month to month. These debts may be combined with other debts like car loans, a home mortgage,

student loans and more, and the result is that you may be paying several thousand dollars per month in debt payments to various financial institutions. One of the biggest struggles that many people face financially pertains to credit card debt. The revolving term and high interest rates on many credit card accounts makes these difficult to pay off. Many who carry high debt balances today are looking for helpful advice for eliminating their debt.

The Debt Solutions Available to You

If you are struggling with your own debt situation today, you may be wondering what the best strategy to follow is. You may have already tried to eliminate debt balances by paying them off on your own. This can be a very slow and frustrating way to pay off debt balances, and this is particularly true if you can only afford to make minimum monthly payments. Other options include debt consolidation loans, debt settlement and bankruptcy.

A Closer Look At Consolidation Loans

Many who are burdened by credit card debt would love to find an effective way to reduce debt without damaging, or further damaging, their credit rating. So is consolidation a good solution? When you consolidate your credit card debts, you are refinancing your accounts into a single account. Typically, the account is a new loan, and it often has a lower interest rate than the credit cards themselves. It also typically is an installment loan rather than a revolving loan. The nature of a consolidation loan allows for debt balances to paid off more quickly and for interest charges to be reduced in most cases without seriously affecting your credit rating.

When Consolidation Isn’t The Answer

These consolidation loans, as mentioned, usually are installment loans. This means that if you have a loan with a five year term, at the end of five years, the debt will be paid off. If you have high balances on your credit cards that would take longer than five years for you to pay off, consolidating your accounts can help you to pay them off more quickly. However, if you have several small accounts that you could pay off within a year or two, consolidating them into a longer term loan may end up costing you more money in interest charges over the long run. In some cases, such as if you are struggling to make ends meet, consolidating debts to enjoy lower monthly payments may be a good solution, even if it does result in a longer repayment period.

Each person’s situation with debt is unique. For some, the debt help they need may be found by consolidating credit card accounts. Others may be better off paying their debts off on their own or seeking more significant debt solutions such as settlement or even bankruptcy. The method you choose for paying off your credit card balances can make a world of difference in your success with this effort as well as with the time and expense associated with it.

Explore the options available to you in more detail to learn which option may be best suited for you.