According to Federal Reserve statistics, the average indebted household carries about $15,000 in credit card debt, which may cost hundreds of dollars each month to service. As a result, the chief concern among families is to reduce the overall debt load quickly. However, in many cases the family budget won’t allow for it.
One option for credit card relief is simply to pay the minimum monthly payments. This is not so effective due to high interest rates, which often swallow up thousands of dollars over the course of a loan. Another option is to take out another loan with a lower interest rate, but this can cause your credit score to go down, which could raise your future interest rates even further. A third option is to file for bankruptcy, but this is an extreme option that will have permanent negative impacts on your financial record.
If you’re looking for a safe, low-risk, effective option for credit card relief, debt consolidation may be the right path for you.
What Debt Consolidation Does
Consolidation is the official term for combining all of your debt service payments into a single monthly payment. You pay the consolidation service the amount of money for all your monthly debt payments and a small service fee, and the service (essentially acting as a middleman) pays the banks and other lenders for you.
Not only does this help you avoid forgetting to pay your credit card balances, but it also gets you lower interest rates. This is because banks determine interest rates based on risk, but if a debt consolidation company vouches for you, you are seen as a less risky investment. As a result, your interest rates go down and you pay off the loan much more quickly.
Benefits of Paying Off Loans Quickly
The chief benefit of paying off your loans quickly with a debt consolidation plan and credit counseling from a company like CreditGuard of America is that you’ll have the money to spend on something else. When you reduce your household’s debt, you reduce the amount in your budget you spend each month staying current with your credit card bills. This money can go towards savings for any one of a number of good investments such as a new business venture or a down payment on a house.