Credit Card Consolidation is the process of taking the debt you've compiled on your cards and grouping them all together into one loan. This process can be extremely beneficial, if managed properly. Good financial management is key to successfully lowering your monthly payments, interest rates, and overall debt.
Embracing Debt Management
It goes without saying that the best way to evade debt is to properly manage your finances. But if it were that easy to avoid, most of the population wouldn't find themselves up to their knees in it. Whether you've chalked up a large bill on essential car repairs or blew a couple hundred while out shopping, you need to keep tabs on your spending in relation to your income.
This is where people get into trouble; they don't want to have to worry about how much money they have in the bank and just use their credit card instead. I've done this myself. Everyone has done this. At the moment of purchase, it seems like the "safe" thing to do, because there's no risk of my debit account bouncing if I use my credit card instead.
Unfortunately, this "safety" measure can add up rather quickly. Often times, the strategy backfires and you end up spending way more than you would have had you been checking your account balance.
Debt Management Companies
For those not interested in monitoring their own finances, there are companies that will do the job for you. The process that most debt management companies follows is simple: you agree to a fixed amount of your income that they will automatically dock from your pay check each month and distribute to your credit card companies. This way, the money is already gone, and the temptation to spend it is nipped in the bud.
If you are already behind on payments and getting constant phone calls from your creditors, signing up with a debt management company can quickly put an end to that. Also worth noting is that these companies don't only deal with credit card debt; they will manage personal loans, catalogue and overdraft debts as well.
Are There Downsides To Debt Management?
Despite the many consolidation benefits, there are some popular reasons that people have for opting against debt management; many of these reasons however, are unjustified. Some of these include:
• After you sign up for a debt management program, you won't be able to open new lines of credit. This can be a rather annoying detail for those who aren't struggling financially, but a good idea for people in debt. Debtors probably shouldn't be opening new accounts anyway.
• For some companies, it can take up to a month for them to process all your information, and if you need immediate results, it may not take effect fast enough.
• A common myth is that your credit score may drop. This would only be true if you had an exceptional credit score to begin with. Chances are though, if you are in need of a debt management company, your credit score is already low. Contrary to popular belief, debt management can often raise your credit score, while also eliminating late fees that you would have incurred had you not sought their assistance.
Debt Management Can Get you Out of Debt
To manage your debts, it may be necessary to get some outside assistance. Fill out our free evaluation form below if you're still unsure. One of our experienced representatives will contact you shortly with a detailed analysis of your financial situation, and promptly get you the answers you need.