Credit card debt consolidation often make sense for consumers with several high interest credit cards.
Instead of paying back all these cards independently, many consumers choose to consolidate the loans and pay them back at a lower interest rate.
Given, the right situation it can be a great way to eliminate thousands of dollars over the years.
So does this make financial sense for you? Credit card debt consolidation is where consumers and small businesses can trade in their high interest unsecured debt for a lower interest secured debt loan.
Unsecured debt, such as credit card debt, has a high interest rate due to the risk involved for the lenders.
A consolidation loan will pay off your original high interest debt.
In return you will have to back up your new low interest consolidation loan with a security such as a home or automobile.
By paying back the debt at a lower interest rate, even if just a couple percentages, can have a major impact on the overall balance you end up paying back.
For consumers that are struggling to meet their monthly minimum payments there are better options than consolidation.
Debt settlement is one of them.
Debt settlement programs negotiate the actual balance of your unsecured debt while consolidation loans attack the interest rates.
Debt settlement is seen as a legitimate alternative to bankruptcy and only those consumers and small businesses that are going through financial hardship should consider it.
If you have over $10,000 in unsecured debt and are experiencing a financial hardship then debt settlement could be your most affordable option.
New federal laws were recently passed that ban these companies from collecting upfront fees.
Now if they can't reach a successful settlement deal and cut your balance by at least 40%, you don't pay a dime!