The Differences between Debt Reduction and Credit Card Consolidation

Using credit cards to consolidate your debts is not as effective as debt reduction. Credit cards often have high rates of interest, and will often lead you into deeper debts. In fact, credit cards are one of the leading causes that debtors seek out debt consolidation solutions.

credit card consolidation

Debt reduction

Debt reduction means that you are working to decrease your bills, not add or keep the bills in existence by using another source to pay off the debt. Therefore, instead of considering credit cards as a source for debt consolidation, you must find a way to reduce your debts.

Let’s say you owe money for your mortgage, car payments, insurance, utilities, and other bills that add up to $1200 per month. Now, is there a way we can reduce this amount? Absolutely, but can we find a mortgage that will refinance our loan and help us to combine our monthly bills into one payment?

Yes. There are loans available that offer cash back, underpayment, and overpayment plans; as well as loans that will wrap your bills into one, combining the bills and adding them to your monthly installment.

What About Your Utilities?

Do not misinterpret this: your utilities are your responsibility, but for the most part, your car payment, mortgage, and any credit cards or other loans will be rolled into one monthly payment. Therefore, if you’re paying out of the $1200 up to $800 per month toward car payments and mortgage, you may find a lender who will reduce this amount to $600 more or less per month.

Furthermore, if you land a loan that offers cash back, you can use this money to payoff your debts.

Finally, utilities can be reserved and grocery bills can be reduced. In addition, insurance coverage can also be reduced. Therefore, debt reduction is wiser than credit card debt consolidation in the long run. credit card consolidation

How to Find the Right Debt Consolidation Agencies

Debt consolidation agencies and services offer a solution for debt management, debt consolidation, and advice on managing debt. There are several courses one can take to consolidate their debts. One way to avoid late fees on debts, or else shut-off notices is to ask family members or friends that may offer you the money. Of course, you will need to repay the debt; however it is less risky than if you borrowed the money from a debt consolidation agency or else some other source.

If you own a home, you may want to consider refinancing, since some lenders will offer you a debt consolidation solution attached to the new loan. Some banks or mortgage lenders will search for loans that roll your monthly payments into one bill, which is the same effect you will get if you get help from a debt consolidation agency.

Chat To Your Creditors

You could also call your creditors and ask for leniency or else more time to repay the debts. Many times creditors prefer to deal with the customer than with the collection agencies. The reason is that they have hopes that you will remain a customer if they give you a chance. On the other hand, there are creditors that could care less if you have enough money to pay your bills or even enough money to survive. The greedy souls are out to get their pay and will attach additional fees to your debts.

Debtors are protected under the laws; therefore, if you are in debt and are looking to consolidate your bills, then check out the laws at the local library before resorting to a debt consolidation agency. Anytime you have the upper hand and are armored with knowledge, the consolidation agency in question will have a harder time trying to take advantage of you.