Why consolidation is best

They say the average consumer has around $15,000 in credit card debt. Due to creditors taking advantage of its customers, people tend to get fed up and look for options to resolve this debt.  Options such as a debt consolidation loan through a home, should be avoided at all costs. It makes no sense for a consumer to put up secured property such as a home to consolidate debt.  When a consumer does this,  they tend to turn unsecured debt into secured debt which in turn puts the consumers home at risk.

In summary, we'll explain why debt consolidation is best and how it benefits the consumer.

Debt consolidation can keep accounts current

Unlike programs such as debt settlement or bankruptcy, debt consolidation will keep the consumers credit cards in good standing. This helps the consumer when trying to obtain a home, car loan or even further debt. Programs such as settlement or bankruptcy, tarnish the consumers credit score which makes it far more difficult when trying to make necessary purchases.

Each month, the minimum payments are redirected to the creditors based on the new terms and conditions. The payments do not go into a trust account, but are directed to the banks each month. Of all debt relief programs, consolidation is considered one of the best methods to enroll credit card debt.

How consolidation can lower interest rates

The average consumer has an interest rate of 19%. When enrolling into a program such as consolidation, the average interest rate is far under 10%. The interest question has to be by far the most common reason for people wanting to consolidate.

Furthermore, when consumers make minimum payments a vast majority of the minimum payment is applied toward finance charges and fee's. When enrolling into a debt consolidation program, the interest rate is so low that a massive percentage of the new minimum will be applied toward the actual balance.  This helps when trying to pay down the debt.

How consolidation can lower monthly payments

Another benefit when considering debt consolidation, is the reduction of minimum payments. The average consumer has to pay between 3 to 4% of the total balance as a minimum payment. When enrolling into a debt consolidation program, consumers will have a new minimum at round 2% or slightly above.  When trying to save money on a month to month basis this program may be able to help when trying to save money.

If delinquent, how consolidation can bring accounts to current

Most consumers are current with their credit card debt.  However, a few tend to be behind on their debts which makes this benefit an excellent addition to the program. Consumers whom are behind on their debts, will have the accounts reaged to a current status after a few consecutive payments.

So when trying to find out why consolidation is best, it's important to understand these benefits. Of all debt relief programs that are offered today, consolidation is the only program that is not determined into the consumers credit score.

Additional resources:

• Debt settlement vs debt consolidation
• Debt consolidation and your credit