There are many considerations to determine if a particular debt relief program is perfect for a debt situation. It all depends on your financial capabilities in terms of debt payments and also what you are willing to sacrifice to reach your financial goals.
Debt consolidation can be the perfect debt solution for people with credit card debt – especially for those who are concerned about their credit scores. This has the least effect on your credit history and if there will be a decrease, it is only minimal and you can easily recover from it.
In this type of debt relief, the consumer will enjoy a single payment scheme that is often lower than your current credit card minimum payment. This happens because the current debt amount of the consumer will be distributed over a longer payment period. This will allow people to avoid late penalty fees even when they can only afford to pay lower than the minimum requirement.
There is also the high possibility of a lowered interest rate – which is another reason why debt consolidation is a perfect debt relief option. The high interest of credit cards make it a very hard debt to get out of. If you really want to solve this problem, you may want to concentrate on the interest. After all, you are wasting money by paying it off. So the less you pay, the more savings you will get.
However, getting a low interest rate is not a guarantee and will depend on the specific program that you will use as a solution. With debt consolidation loan, this happens by choosing a low interest loan. The requirement to get approval for this is either a high credit score or a personal collateral that is valuable enough to guarantee the loan amount that you will take.
If you choose debt management, however, this is not a guarantee because it will depend on how the debt counselor will get on the good side of the creditor. In some cases, the creditor will agree to lower your interest rate. In most instances, they will only agree if you manage to make your payment current. But nevertheless, the possibility is still there.
Another reason why this debt solution is perfect for credit card debt is because it creates a single payment scheme for the consumer. Instead of juggling and trying to keep up with multiple accounts that you have to pay for, you get to combine them. With debt consolidation loan, you pay off the other debts with the loan you applied for and thus be left with only one debt to pay for. In debt management, you will just send the total monthly payment to the debt counselor who will distribute the funds to your creditors – according to the debt management plan that you created beforehand.
While debt consolidation is without a doubt effective, you need to realize that it all relies on your own ability to stay out of debt. Practice proper financial management so you can conquer your debt problem by never being in the same financial situation again.