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Should I Consolidate My Credit Card Debt?

When you are making hundreds of dollars worth of credit card payments each month, it’s easy to feel like you’re in over your head. You may be searching for any easier way to deal with your debt or to make your payments more affordable. You may be exploring your options and asking yourself, “Should I consolidate my credit card debt?”

That question isn’t always simple to answer.

Pros and Cons of Credit Card Consolidation

Credit card consolidation can have some important benefits.

  • It allows you to simplify your monthly payments into a single sum.
  • It can save interest in the short term and even keep you from building up debt on high-interest cards in the long-term.
  • It can sometimes lower your monthly payments.

On the other hand, credit card consolidation can be used far too often as a stop-gap that fools you into thinking you are debt-free when you have simply moved it around. Even worse, many people use the newly empty card balances as an excuse to max them out again.

Five Questions to Answer Before Deciding About Credit Card Consolidation

In order to make it easier to decide whether or not credit card consolidation is right for you, you need to honestly look at your personal situation and figure out if it’s a good option. The answers to these five questions will give you the perspective you need to decide.

Could I afford to simply pay my credit cards off in less time than I’d pay a consolidation loan?

If you could pay off your credit cards in the next few months or even years (or now!), you probably are better off simply prioritizing paying down the debt rather than getting an additional loan. Although the rate may be lower, it could cost you more in interest payments in the end.

Will consolidating my credit card debt reduce my interest rates?

Generally, the reason people consolidate their credit card debt is to reduce interest rates, but not all consolidation loans actually offer lower rates than you may be getting with your credit card already. You have to do the math and check that you will be saving money overall, not just on your card with the highest interest rate.

Can I afford the monthly payment?

Not everyone realizes that the monthly burden of a consolidated loan may actually be higher than their credit card payments. Although the overall interest may be lower, the term may be shorter, which means that the monthly payment may be more than you’re currently paying.

Once my credit cards are paid off, can I stick to a budget and stop using my credit cards for good?

Too often people use the “clean slate” as an excuse to use their credit cards again, but you have not eliminated your debt problem if you just acquire more debt when you’re done paying your credit cards. Consolidation is only a good idea if you can stick to a budget afterwards and cut up some of those cards.

Is the amount of debt too much for me to handle?

Getting another debt in your name will only do further damage to your financial situation if you can’t afford to pay it off. If your debt is truly out of control, you need to look for a solution that will actually help you eliminate your debt problem, not simply ignore it for a bit longer.

After you’ve answered these questions, you’ll be much better prepared to realistically assess the costs vs. benefits of credit card consolidation.

How a Cleveland Bankruptcy Lawyer Can Help

If you are only considering credit card consolidation because you are desperate to take care of the debt you don’t think you can handle, it may be better to consider a more permanent solution. A Chapter 7 or Chapter 13 bankruptcy filing may be an answer to your overwhelming debt.

Talk to a Cleveland bankruptcy lawyer at Luftman, Heck, & Associates today for a free consultation about your debt and what we can do to help. Call (216) 586-6600 today to schedule your appointment.

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