OK, so you're having some cash flow problems. Maybe it's temporary, maybe not. The point is, you need to change the situation ASAP! You can get a debt consolidation loan to ease the financial pressure every month. This works for many, but you must watch out! Let's look at some facts. First of all, and this is vital, unless your current financial situation is due to a one time, unforeseen circumstance, you've got to change your financial habits. If you fail to do so, you'll only wind up much worse off than you are right now.
It's kind of like going on a diet. We've almost all had this happen. You go on a diet, and lose the weight, only to have it come back within a year or two. Sometimes it comes back worse than before you started the diet. So it is with debt and spending. If you fail to change your spending habits, you can help your situation with a debt consolidation loan, only to see all your debt return in a year or so. The difference is you won't be able to use a debt consolidation loan to dig yourself out of trouble this time.
Fact #1 Between 70% and 80% of Americans that take out a debt consolidation loan to pay off high interest credit or other loans actually end up in a worse financial situation within 2 to 3 years. The main reason for this is they fail to change their spending and credit habits. One study found that purchases made using a credit card were, on average, 14% higher than similar purchases made using cash. It's easier to spend more when you don't have to actually have the money up front. Don't fall prey to this tendency.
Fact #2 Credit card agreements are structured to extract the maximum amount of profit from you for the credit card companies. Once you get trapped into paying only the minimum payment, or slightly more, it could take, are you ready for this, almost 20 years to pay off a 16% credit card with a $12,000 balance if you make only the minimum payment!! During that time, that very long time, you'll have the privilege of handing over between $16,000 and $20,000 in interest payments. That means you'll have to earn, before taxes, almost $45,000 to pay off your original $12,000 debt. I hope whatever you bought was worth it. Granted, sometimes credit cards are used for legitimate emergencies, but too often they are used for frivolous purchases that sabotage your financial independence.
Fact #3 When you have multiple credit cards, it's much more difficult to ensure you don't accidentally make a late payment. It's extremely important that you make no late payments. Why? You may ask. What could one little late payment, especially if it's only a day or two late, cause? It could cause you to go through years of credit hell, that's what. The way credit card contracts are structured today, the credit card issuers are allowed to instantly raise your card's interest rate when you make a late payment. That doesn't mean skipping a payment entirely or being 15 or 20 days late, either. They can raise your rates if you are only ONE DAY LATE.
This can potentially cost you thousands of dollars in interest over the life of the card. Their other dirty little secret is that, unless you call and ask them to, they won't lower the rate back to it's previous figure. They'll keep it at the new, higher rate, and obviously maximize their profit. Many credit card companies will lower the rate back down again after a specific time period, usually 6 12 months, but you must call and ask them to do so. One more daunting fact. The late payment, if it's over thirty days late, will be reported on your credit report, negatively impacting your credit score. Other credit card companies can use your lower credit score to raise the interest rate on all your other credit cards!
These facts tell us that debt consolidation may be a great tool to get you out of your poor financial situation, but like any other tool, you must use it properly and be sure you are using the correct one for your particular situation. A debt consolidation loan can make much easier the task of making multiple credit card payments, because you won't have to. That eliminates the chance of accidentally making a late payment and affecting your credit rating. They also show that if you don't change your spending habits, a debt consolidation loan is only a short term solution. In time, you'll be right back to contributing to the financial institution's bottom lines. So maybe you should get a debt consolidation loan, it can really be the way to improve your financial picture. But, remember, you should only take the step if you're careful in selecting the loan, the interest rate is low enough to be beneficial and there are no hidden fees or charges. Choose carefully, the money you save will be your own!
Steve writes about a multitude of business and finance topics. He has been a principal in several businesses both online and bricks n mortar, including one that grossed over $1.5 million a year. See the Debt Consolidation Loan and Finance Guide for what you must know about getting out of debt and staying that way.