Credit Card Debt Consolidation Loans
Lately there's been a lot of bad press about credit card debt consolidation loans. People are saying that the interest rates are really high, so they don't really help you. But nothing could be further from the truth.
How Credit Card Debt Consolidation Loans Work
Credit card debt consolidation loans are loans at their most basic. First of all, you have to have collateral. Usually, if your car is paid for, that's an excellent means of collateral. If you're a homeowner, some lenders might tell you you can use your house as collateral, but there's a better program for homeowners than credit card debt consolidation loans. (Homeowners should get a debt consolidation mortgage, but that's a story for another page.)
Anyway, once you qualify for the loan, you'll get a check in the amount it takes to pay off all your credit cards. Then you do just that. Now, some people would say that's just trading in one set of debts for another. And it is. But there's a difference. On credit cards, you're paying interest in the neighborhood of 14-24%, whereas credit card debt consolidation loans charge an interest rate that's usually in the single digits. That results in thousands of dollars in savings, and it means that you'll have the debt paid off in five years, not 18-30, which is what it would take if you kept on paying just the required minimum, depending on what you owe and what interest rates you're paying.
So, where are all these reports about credit card debt consolidation loans having high interest rates coming from? We admittedly don't know. It could be that these are credit card debt consolidation loans that are for people with bad credit. Some of those have higher interest rates, but not so high that it wouldn't be beneficial to get one. If you're considering a debt consolidation loan of any kind, do the prudent thing and check them out first. All it will cost you is a little bit of your time.
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