At first glance, credit card consolidation loans can sound great. You pay off high-interest overdue bills quickly and easily. But credit card consolidation loan rates also have their fair share of hidden dangers. Before proceeding on with a credit card consolidation, it is important to understand their dangers so that you can avoid them.
When you’re struggling with overwhelming debt, even the smallest hint of relief can be enticing. But there are so many different types of debt relief out there that it can be incredibly easy to choose the wrong kind. In the worst case scenario (and unfortunately the worst case happens all too often), choosing the wrong kind of credit card consolidation or consolidated debt loans can have seriously negative consequences.
Know What to Look For
Many people look at consolidated debt loans just because they are suffering through a tough financial situation. Much of the time, they don’t really know what the services are that they need, they just know that they need some kind of help.
In their most basic sense, credit consolidation loans are used to pay off credit card debt. Every loan will vary in amount, repayment period, and interest rate. While the sheer amount of options on credit card consolidation loan rates can be overwhelming, they also work to your advantage by allowing you to choose the one that is best for you.
Credit Consolidation Interest Rates
The biggest hidden danger in credit card consolidation loans is interest rate. It can make or break a borrowing decision, but, for some reason, is also one of the most often overlooked factors.
Consolidated debt loans often tempt those in debt because they are a quick fix. They can make your debts more easily payable and combine all of your monthly payments into a single payment. However, as is mentioned above, many people often jump at the chance to make their struggling finances more organized without first considering the interest rates.
When you are looking for a debt consolidation loan, make sure that the interest rate is the first thing on your mind. The higher the interest rate, the more money you will eventually end up paying on the loan. However, it can be difficult to qualify for low interest rate loans.
Do You Qualify for Low Interest Rate Loans?
Not everyone can take out a credit card consolidation loan plan. If your credit card payments are late or your credit score has fallen too much, you just might not quality for one, especially one with a low interest rate. Many lenders are wary to allow you to pay off secured debt (debt that is tied to a property like a mortgage or an auto loan) with a consolidated loan.
Make Sure That it is a New Loan
If you ‘luck out’ and qualify for a low interest loan rate, another hidden danger might be waiting right around the corner for you. While it does have its positive benefits, some credit card consolidation services will simply consolidate all of your monthly payments into a single one rather than give you a completely new plan.
Make sure that you understand the complexities of the proposed plan. It is particularly important to know whether your existing debts will be repaid immediately (and then you will pay this off) or if they will be repaid over a period of time.
Is it Legitimate?
Credit card consolidation is one of the services with the most scams. Because people are struggling, emotional, and need help, they are oftentimes much more likely to fall for scams, fakes, and bad deals. To steer clear of these, avoid upfront fees, say no to anything that doesn’t feel right, and check the service’s references. Dealing with a scam credit card consolidation service can make your financial woes even worse.
Manage Your Debt, Don’t Add to It
The point of credit card consolidation is to create a solid payment plan. The plan should combine all of your payments into one new payment and come with a low interest rate. Don’t agree to anything that you can’t pay for, even if it sounds like an amazing deal. You only want to agree to a credit card consolidation loan plan that you can actually manage.
Credit card consolidation loan rates come with a lot of hidden dangers. These dangers are especially dangerous to those people who are really struggling with debt and will do just about anything for relief. By knowing what you need, taking your time, and looking at all of the factors (amount repaid, repayment period, and interest rates), you will be able to consolidate your debt loans and come up with a credit card consolidation loan plan that is good for you.