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Considering credit card debt consolidation? Here’s what you need to know before deciding

Couple looking at debit, bills
Feb 15 2023

Considering credit card debt consolidation? Here’s what you need to know before deciding

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Credit card debt can be a stressful and overwhelming burden, so it’s no wonder that many people are considering consolidating their credit card debt. But before you dive in, there are a few important things to know about credit card debt consolidation.

Today, we will answer some of the most frequently asked questions about credit card debt consolidation, helping you make informed financial decisions.

What is credit card debt consolidation?

Simply put, it’s when you take out a new loan to pay off existing debts. 

How does it work?

Credit card debt consolidation can be done by:

Pros and cons of credit card debt consolidation

Credit card debt consolidation can be a great way to get out of debt. However, there are some pros and cons to consider before deciding if it is the right option for you.

Pros

  • You will only have one monthly payment to make, making budgeting easier.
  • The interest rate on your consolidated loan may be lower than the interest rates you currently pay on your credit cards, saving you money.
  • If you consolidate your credit card debt with a personal loan, you may be able to get a longer repayment term, reducing your monthly payments.
  • Making timely payments on your consolidated loan can help improve your credit score over time.

Cons

  • You may end up paying more interest overall if you extend the repayment period on your consolidated loan.
  • If you use a home equity loan to consolidate your credit card debt, you risk losing your home if you cannot make the payments on the loan.
  • There are fees associated with consolidating debt, including application fees, origination fees, and closing costs. 
  • If you continue to use credit cards after consolidating, you could end up deeper in debt than before.
  • Be aware of potential pitfalls. Consolidating your credit card debt can simplify your finances, but it’s not a cure-all. Always remember to ask about fees, interest rates, and repayment terms.

Alternatives to credit card debt consolidation

Debt management

This type of credit counseling can help you develop a plan to pay off your debts. A debt management program may be able to negotiate lower interest rates and monthly payments with your creditors.

Debt settlement

This is when a debt settlement company negotiates with your creditors to pay off your debt for less than what you owe. It’s important to know that this option can have a negative impact on your credit score, and there’s no guarantee that your creditors will agree to settle your debt.

Balance transfer credit card

You can transfer the balance of your high-interest credit cards to a new credit card with a lower interest rate. This can help you save money on interest and pay off your debt faster. Just be sure to watch out for balance transfer fees.

A credit union loan 

Personal loans typically have lower interest rates than credit cards, which can be another way to save money on interest charges. Just be sure that you can afford the monthly payments on the loan; otherwise, you could end up in even more debt.

When is consolidating the best option?

Debt consolidation is often the best option for people with a lot of debt from different sources. There are a few things to consider before consolidating your debt. 

  • You need to make sure you understand the terms of your consolidation loan.
  • You should ensure that consolidating your debt will actually save you money.
  • You need to make sure you can afford the monthly payments on a consolidated loan. 
  • You must ensure that you’re consolidating your debt with a reputable lender. 

 

*H2* How can CVF credit union help you consolidate your credit card debt?

CVF offers several options for consolidating credit card debt, including personal loans, balance transfer credit cards, and home equity loans. Moreover, there are several benefits you can enjoy when taking up their help, including:

  • A low-interest rate on consolidation loans
  • No fees for balance transfers
  • No annual fee
  • A rewards program that offers points for every dollar spent
  • Free financial counseling 

 CVF will work with you to find the best solution for your unique situation and help you get out of debt as quickly and affordably as possible. Speak to a member service rep today.

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