Consolidating credit cards pros cons
Other advantages include having fewer payments to make each month, and less likelihood that you'll be late on payments.
What you rarely hear about are the disadvantages of debt consolidation.
Since credit card interest is imposed on the current unpaid balance every month, payments can be high, especially at interest rates that often exceed 20% or 25%.
Annual interest rate on a home equity loan can be significantly lower, often in the 5%-8% range, and each month you repay both principal and interest until the loan is repaid.
They can also provide perspective on the advantages and disadvantages of other ways of paying off debt, including debt settlement, debt management and bankruptcy.
We also offer great educational resources on our website, where you can learn more about topics such as budgeting, home ownership, saving for college or retirement, bankruptcy and credit card debt.
If you’re considering consolidating your debt with your home equity, consider a Figure’s Home Equity Line.
Combining the best characteristics of traditional HELOCs and home equity loans, our unique home equity solution offers a fixed interest rate and full access to your funds up front, while still enabling you to make additional draws once you’ve repaid your balance.
Home equity line of credit Proposed interest rate: 5.99%Loan term: 30 years Estimated closing costs: ,300If you made the same monthly payment on your new loan (and didn’t spend any more) you could pay off your debt in just under two years (five months less than you could pay off your credit cards) and save ,195 in interest payments.
When considering debt consolidation advantages and disadvantages, we recommend you also consider a debt management plan.
Rather than consolidating debt, you'll simply consolidate all your monthly payments into one single payment to a debt management company, which takes care of paying all your bills on time, while also seeking reductions in interest rates and finance charges to help reduce the amount you owe.
The card user can transfer debt from other high-interest cards to the new one.
Most no-interest balance transfer offers are limited to 12-18 months.