Easier to Manage: One of the main reasons is that having multiple credit cards or loans is difficult to manage. It's hard to see your real financial position and with so many bills you can easily miss bill due dates leading to penalty charges and possible a reduction in your credit rating. By having just one credit card or loan you can see how much you owe, what interest you are paying and ensure you make all payments on time.
Lower Interest: Cutting your interest payments is another top reason for consolidating debt. This can be done by shifting the outstanding debts from a credit card charging high interest rates to a credit card with a low or zero interest balance transfer deal or through a low rate debt consolidation loan.
When choosing a debt consolidation products there are a few things that you should think about.
Highest Interest First: Make sure you consolidate and pay off the credit cards or loans with the highest interest rates first. If you can't get a consolidation loan or transfer large enough to cover all your existing debts then make sure you consolidate the debts with the highest interest rates first.
Longer Term Offers: If you think you are going to need a fair amount of time to pay the debts off then make sure the consolidation offer will allow you to do this. For example, if you know your not going to pay off the debt quickly due to you budget then it may work out cheaper to choose a long term balance transfer offer with a low interest rate rather than choosing a zero interest short term offer. That zero percent offer may soon expire and your interest rate may skyrocket to a typical credit card rate. A card offering 3.99% for twenty four months may offer better value overall.
If your looking to consolidate your debts then you have the choice of using a credit card balance transfer offer or a stand alone consolidation loan. If you're mainly concerned with credit card debt consolidation then a balance transfer may be a cost effective option. If you are dealing with other debts such as auto loans and store credit then a debt consolidation loan may be a better option.
Don't forget that consolidating debt does not pay it off. You are still going to have to make monthly repayments and the debt still exists. If you want to get out of the problem then you will probably need to make a few changes to stop the problem from happening again. Think about starting out by making a household budget and look for areas where you can cut back. With this all round approach you should be on the road to ridding yourself of your money worries.
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Richard Greenwood is co-founder of the Click 4 Group an Australian network of banking websites designed to help consumers compare and apply for bank products. Whether it's finding the best credit card or applying for a debt consolidation loan the sites have all the information you need.