The majority of adults in the United States own and regularly use credit cards.  The convenience and availability of credit cards has led to the popularity of this form of currency, causing some consumers to “get in over their heads.”  Falling behind on payments can result in even more financial debt and poor credit ratings.  Credit card debt consolidation loans may offer some relief for this type of consumer credit difficulty. 

Credit card debt consolidation loans are very enticing in that they may actually save the borrower money, by reducing the Annual Percentage Rate (APR) being charged against their debt. 

Making a payment on a credit card after the due date can result in a hefty late payment fee.  These fees can add up significantly if they are being accrued on several different cards, since they are also included in the debt affected by the APR.  Generally, credit card APRs are much higher than for loans from other sources.  Therefore, late fees can really significantly increase the balance and expense of a credit card.  With a credit card debt consolidation loan, the interest being attached to the late fees is eliminated. 

An additional factor to consider when looking into a credit card debt consolidation loan is the number of credit companies that are owed money.  If only one company is owed a small amount, then a credit card debt consolidation loan is probably not the best plan.  However, if more than one company is owed a significant amount of money, a credit card debt consolidation loan might be the perfect option.  A credit card debt consolidation loan will combine all credit card debts into one lump sum; meaning only one payment will have to be made each month.   This payment amount will be based on the borrower’s budget, so it should be affordable for anyone. 

A credit card debt consolidation loan can also ensure a lower APR.  Being late with a payment on a credit card gives the company the right (as expressed in the credit card agreement) to increase the APR charged on that credit card.  Some APRs can exceed the 20% mark due to delinquency on the part of the borrower.  An APR that is calculated at this rate really makes it difficult for borrowers to get out of debt.

Many people have tried calling their credit card companies on their own to request a lower interest rate.  Sometimes the company will honor the request.  However, it is quite rare for a credit card company to lower the interest rate for a customer who does not regularly pay their bill on time.  In this case, a credit card debt consolidation loan can be very helpful.  When credit card debt is consolidated, the lender will often work to get the APRs reduced to more manageable percentage rates, thus saving the borrower money and allowing the debts to be paid off more quickly.

Sometimes, people with significant debt do not want to settle for a lower APR and a lower monthly repayment amount.  They would like to see a reduction in the actual amount owed.  Unfortunately, a credit card debt consolidation loan cannot guarantee that will happen.  More than likely, the balance will have to be paid back in full.  A credit card debt consolidation loan is not a “get out of jail free” card.  It simply helps a person manage the debts they have accumulated.  

A possible drawback to the credit card debt consolidation loan program is the effect it can have on one’s credit report.  If a debt consolidation company’s service is used, a Third Party Administered (TPA) note will appear on the credit report for any bills they helped manage.  The TPA note can be a deterrent to future creditors.  For this reason, many choose to forgo a credit card debt consolidation loan and attempt to find a solution on their own.

However, even though a TPA note is not a highly regarded mark on a credit report, it is preferable to having a late or nonpayment notation.  A TPA shows future creditors that the borrower had financial difficulty in the past, but attempted to resolve it in an efficient and timely manner.  This mark actually shows that the borrower took responsibility for their financial affairs, which is something that lenders take into consideration when loaning money to consumers.

For consumers who are having trouble managing credit card debt on their own, a credit card debt consolidation loan may be the solution they need.  While this loan does not promise to eliminate debt altogether, it can simplify the bill paying process, help keep interest rates under control, and possibly reduce the total amount owed.  These benefits alone make a credit card debt consolidation loan an attractive solution for those with too many credit cards in their pockets.