Do you know what Debt Consolidation means?

Credit card debts can be virtually a nightmare and unfortunately lots of people in the whole world are facing this kind of problem today. Getting trapped into credit card debt can happen faster than most people imagine – even if you don´t overestimate your financial situation: Everyone can lose his job, and who will pay off the debt then?). Luckily there is something called “credit card debt consolidation” which is often considered the most crucial measure in reducing and eliminating credit card debt.

Now what is meant by “credit card debt consolidation”?

According to Wikipedia “debt consolidation” means “taking out one loan to pay off many others”. So credit card debt consolidation is a strategy to simplify your debt situation by paying off all your credit card debts (often from multiple credit cards) by taking out one single loan (or at least a lesser number of loans). The benefit of this strategy depends on the conditions of this new loan: The monthly instalment to pay off the new loan should be significantly smaller than what you would have to pay for all your credit card debts together every month.

For credit card debt consolidation you can also use another credit card which has a lower APR (for those who don´t know: APR means “Annual Percentage Rate”) than your other card has. So credit card debt consolidation can be regarded as a kind of balance transfer: You transfer the balance from one credit card with a higher APR to another card with a lower APR.

While this strategy means more time for you to pay off your debts it also means that in most cases the total amount of money you have to repay will be significantly higher than without debt consolidation due to the longer period. What also is important is that the new loan will usually be secured (against your home for example) what might cause you more worries.

So when going for credit card debt consolidation there are many things to bear in mind which our next article will deal with in detail.