Forbes explains that the average U.S household has about $15,000 in credit card debt. If you feel like you are drowning in your credit card debt, you are not alone. Most cannot pay off the credit cards quickly, due to high interest rates that could have them paying $2,000 in interest a year, alone.
Debt consolidation is a strategy that some use to ease the debt burden. In debt consolidation, you would receive a loan or credit card that consolidates all of your debt. The benefits include:
- Simpler payments
- Higher credit score
- Lower interest rates
When you consolidate your credit cards, you will have a lower utilization ratio. A high utilization ratio can have major consequences. To avoid these consequences, you can see your credit score jump after consolidation.
To consolidate your credit card debt, you can use home equity loans, personal loans or balance transfers. In each of these options, the lender pays off your credit card debt. These three ways are the most common and safe ways to consolidate debt. For many families, it is easier to have one place to pay. Likewise, you can usually pay your debt off faster if the interest rate is lower.
The programs that you want to avoid are debt management programs that ask you to pay them but tell you not to pay your credit card bills. These companies may hold your money in an escrow account and then not pay the companies.
None of the above article is to be used as legal advice. It is only meant to inform on debt consolidation.