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Pros and Cons of Consolidated Credit Card Debt

The Debt Consolidation Pros and Cons

In order to realize what the pro’s and cons about consolidating you credit card debt are it is important to first understand exactly what credit card debt consolidation is. Debt consolidation is a way of taking your high interest rate credit cards and paying them off with a lower interest rate loan.

The Pros of Consolidating Your Credit Card Debt

• When you decide to consolidate your payments you will find that it is easy to make one payment instead of making a multiple monthly payments during the month. This often times allows you to forget your payment and destroys your credit.
• The main reason why people consolidate their credit cards is because it lowers the interest rate. Debt consolidations loans range usually 50% of or less then what a credit card interest rate would charge you for purchase. So, in the long run you will be paying much less for your balance then you would if you chose to just keep your money on your credit card.
• When you consolidate your credit cards you will pay a lot less money and that is why a lot of people do it, because the actual payoff, as we discussed in the previous pro, will be much less then the original credit card payoff.
• When you decide to pay off your credit cards and consolidate it on one single loan you now will only have to deal with one creditor verse all of your previous credit card ones.
• Another benefit of Consolidating your debt is that you get tax ride offs when you put the money that you have saved towards other investments, such as a mortgage.

The Cons of Consolidating Your Credit Card Debt

• Paying off your debt sometimes leaves you realizing that you are financially stable and sometimes people take advantage of this feeling and end up putting money back on their credit cards, leaving them further and further into debt.
• When you pay off your credit cards you can focus on one at a time to knock out the payments faster, however the amount of time to pay off the total loan will often times take twice that much.
• Even though you are paying less money in interest, sometimes over the long haul length of the loan you will end up paying more, especially if you have to refinance it in the future.
• Consolidating your loans on your mortgage and secured loans and if you don’t pay them on time you could risk losing everything.

Additional Resources:

• Debt Consolidation
• Debt Consolidation Loans: The Pros and Cons