Credit Card Debt Consolidation

When I was a little younger and certainly more foolish than I am now I started collecting credit cards like they were going out of fashion. Although it perhaps shouldn't have, it surprised me how quickly I managed to get in over my head. With just three or four credit cards maxed out and the only payments going in, the minimum monthly repayments it didn’t take long until I was behind. After a couple of nasty looking letters from the credit card companies and a few more of sticking my head in the sand, as with many others afflicted by credit card debt, desperation clicked in and I started researching and looking at credit card debt consolidation companies. Its the  same as anything, while there are good companies out  there, there are also bad and in some cases the process can be expensive ( not good if you're already in debt), and sometimes can lower your credit score. however, there are also a lot of good things about debt consolidation companies.

Firstly, debt consolidation companies usually combine all the revolving credit debt you have, and the borrower pays them, rather than the creditors, a set amount every month. The debt consolidation company then holds the responsibility of dispersing the cash among the various lenders. The convenience of paying all the bills to one organization can be of huge assistance when you’re overwhelmed with monthly bills, due repayment dates and minimum payment.  The second and probably the biggest bonus of using debt consolidation companies is having them work out deals with creditors, many of which they will already have very good existing relationships with.  They also hold the added bonus of sometimes being able to reduce the overall mount owed and most certainly will be able to reduce or sometimes stop the overall interest mounting up.

There are however, also a few negatives to working with debt consolidation companies and it is hugely important to be aware of them before you make the decision to go ahead and use them.  In most cases, once you accept the company’s terms and conditions, you’ll usually be cutting up your credit cards and closing the accounts as they’re paid off. I have yet to find a consolidation company that allows any credit, in any form, to be kept or applied for during the course of the consolidation.  If there are any out there I'll be pleased to be proved wrong.   Another thing to be aware of is that, if you have anything other than revolving credit; i.e, mortgage defaults, car loans etc., they aren’t included in the consolidation. This means you’ll still have to make those payments separately.

Of course, there are also other ways to pay off your debt quickly and somewhat efficiently without debt consolidation; i.e. a rolling payment plan. In this type of repayment plan you make the maximum extra payment to one particular card until it’s paid off (paying the minimum on any others you might have). Once it’s paid off you take all the money (including the minimum payment) and apply that to the next card to be ticked off. You’ll always end up paying the same total amount which is of course good for budgeting, but each card will get a different appropriation of the funds depending on if they’re at the top of the list to pay off. The good thing is that, once you manage to pay off one card, you get such a feeling of achievement that its usually enough to make you go on and pay off the next.