Unsecured Credit Card Debt Consolidation Can Lead To Trouble
At some point, people can find themselves inundated with credit card debt, typically classified as unsecured, and finding a way to consolidate the debts from several cards should be easy. However, you have to be careful when considering unsecured credit card debt consolidation because many people end up back in the same predicament within two years. When interest rates are low, credit card companies and consumers seem to be a natural match and debt can soar out of control.
Consolidating credit card debt can be a two-edged sword, if the debtor is not careful and committed to getting out of debt, or at least reducing their asset to debt ratio. Many times a person with a lot of debt will find a source for an unsecured credit card debt consolidation loan, reducing their monthly payment significantly. Usually within a few months, without the large monthly payments they used to have, they will take out another credit card or two and find themselves right back where they started.
At this point it is easy to start using the new card to pay the unsecured credit card debt consolidation loan payment, and then take out another credit card in order to increase their purchasing power. This simply begins a vicious cycle of increasing their debt and this time there may be no unsecured credit card debt consolidation loan available.
Use Services To Develop A Workable Plan
There are reputable firms that can help with unsecured credit card debt consolidation, without taking out a loan. These companies can negotiate lower monthly payments with the credit card companies and the debtor makes the payment directly to this company. While the aggregate monthly payment will be less, it will take longer to pay off the total debt, but the additional income can be used for necessities instead of paying interest rates on the debt.
Many companies, especially those that work with consumer groups, have their clients sign an agreement against assuming any additional debt while they are in an unsecured credit card debt consolidation program. If the only debt a creditor has is through unsecured credit cards, they might consider Chapter 13 bankruptcy, which is an unsecured credit card debt consolidation plan guided by the court. This plan can really help someone who has trouble staying away from obtaining new credit cards, as acquiring a new card without the court's knowledge, the debtor could end up outside the plan with nowhere else to turn for assistance.
