Introduction

To consolidate credit card debt refers to a financial management strategy in which multiple credit card balances are rolled together into one new larger balance with a reduced interest rate. There are many companies offering consolidation loans for credit cards. The companies that offer this service are called credit counselors and can be found in the local Yellow Pages or with your credit card company. The following are factors to consider when choosing one that is right for you.

The Cost

Consolidating all of your credit card balances into one loan will usually result in a lower interest rate. This means that over time you will be able to reduce the total amount of money you pay on interest charges, which will save you money in the long run. The interest rates charged by these consolidation companies can vary, so it is important to shop around. If the interest rates offered by the different companies are similar, look for other features that will help you save money.

Check if there are any fees involved in setting up your consolidation loan and for any maintenance of the consolidation loan. The upfront application fees and maintenance charges can be quite high. If you cannot afford to pay these fees, consider looking elsewhere for a lower rate of interest.

The Terms

Review the terms of the credit card consolidation loan carefully to make sure that they suit your needs. Pay particular attention to the fees charged for early payments and the penalties that may be incurred if you fail to make your monthly payment on time. Some companies will allow you to pay by automatic debit, which is convenient but involves a fee. This service should not cost more than $25 per month, so if it does, you are probably being ripped off. As well as the credit card consolidation loan terms and conditions, read through the terms of your original credit card agreements and any promotional offers that you have received.

Conclusion

Consolidating your credit cards into one loan will help you to manage your debt and avoid getting yourself into a situation where you cannot pay off your balance. However, you should be aware of the consequences if you do not keep up with the repayments. If you miss payments, contact your credit card company as soon as possible to explain the situation and ask for some extra time to catch up. If this is not possible, contact another consolidation lender and reopen the loan.