In this new millennium, it is becoming increasingly rare for consumers to use cash to pay for their expenses.  Most people today use credit cards to purchase everything from gasoline for their cars to the clothes in their closets.  The unfortunate consequence of this shift in behavior is that credit card debt is at an all-time high.  Eliminating this type of debt can be difficult, since many people are only able to pay the minimum monthly payment each month and the interest rates are extremely high.  Under these conditions, it can take years to pay off even the smallest credit card balance.  One solution for this problem is to apply for a credit card debt consolidation loan. 

The application process for a credit card debt consolidation loan begins with comparison-shopping.  It is always a good idea for borrowers to research various lenders to find the best deal.  Since the credit card debt consolidation companies do benefit financially from servicing these loans, there can be some pretty steep competition for new business.  The highly competitive nature between these companies will often result in savings for the borrower.

Once a consolidation lender has been chosen, the physical application must be completed.  The information that the average credit card debt consolidation loan application requires will include the borrower’s name, current address, driver’s license number, and social security number.  The social security number will be used to obtain the borrower’s credit report. 

A credit report is the most utilized tool in the assessment of a borrower’s ability to repay the loan, thus having good credit is very important.  Each lender evaluates credit differently.  Some lenders find it possible to assess a borrower’s financial situation by reviewing the credit report alone.  Others need more substantial proof, such as information from W-2 forms from the previous tax year or copies of bank statements and the most recent pay stubs.   Retired people may need to provide information regarding their pension checks or other forms of income.

A person’s assets may be reviewed to determine if there is enough collateral to justify approving the credit card debt consolidation loan.  Also, the borrower’s debt-to-income ratio must be within the consolidation company’s guidelines.  Almost every facet of a potential borrower’s financial situation can be reviewed when that person is seeking a credit card debt consolidation loan.  

Once the application is completed, the company will determine if the credit card debt consolidation loan will be approved.  The process of approval can take anywhere from a few minutes to a few days.  However, it is important to understand the facts regarding credit card debt consolidation loans before entering into the application process.

With a credit card debt consolidation loan, the borrower’s various credit cards are combined into one consolidated loan.   The borrower makes the payment for that loan to the credit card debt consolidation company each month, which in turn, pays the various credit card debts.  Consolidating credit card debt will not reduce the borrower’s total principal balance.  The principle amounts due will still be owed to the creditors until they are fully repaid.  However, sometimes the consolidation company will negotiate with a creditor and get them to agree on a lower rate of interest.  This is an act that is rarely successful when a borrower contacts the creditor himself.  A lower interest rate could potentially save the borrower hundreds of dollars. 

Being approved for a credit card debt consolidation loan does not mean that the borrower’s debts will be paid off quickly.  The credit card consolidation process usually takes around 5 years to complete.  This length of time may be longer than the borrower prefers, but in most cases, a credit card debt consolidation loan may still be the best option.  Without it, the borrower may continue to make minimum payments on his high-interest credit cards without an end in sight.  At least with a credit card debt consolidation loan, there is a set date on which all credit card debt will be eliminated.  The borrower should also notice his balance reducing dramatically each month, which is encouraging as well.  The borrower’s financial problems may not disappear overnight, but at least there is now a solution in place to offer some real relief to the borrower.