Credit Card Debt Consolidation: Pros & Cons

Debt negotiation is a program to help you eliminate credit card debt, personal loans and any other unsecured debt.

Many times credit card debt gets out of control and action is needed to avoid over-indebtedness. A common repayment strategy is debt consolidation.

Through a consolidation you get a loan to pay off your credit card bills and you are responsible for paying off a single loan. This strategy is not ideal for everyone, so learn about the pros and cons to help you make the best decision.


1.- Combine several payments into one. It allows you to organize yourself and the convenience of making a single monthly payment.

2.- Get lower interest rates. If you have good credit, most options for consolidating your debt, whether a personal loan or a home equity line of credit, offer you lower interest rates than credit cards.

3.- Reduce monthly payments. If the interest on your new loan is lower, your monthly payment may well be lower. In addition, if you pay on time and consistently, you will avoid any penalties for late payments, exceeding your credit limit.

4.- Pay 100% to your creditors. It would pay off your creditors and preserve a positive payment history, if the accounts have been in good standing with your creditor.


1.- It may cost you more money in the long run. Despite getting reduced interest and payments, if the repayment period is long, you may end up paying more at the end of the loan tenure. Also, depending on the consolidation method you use, your total debt may increase with the addition of loan fees or fees for transferring balances from one card to another.

2.- You can go further into debt. Either out of necessity or will, if you use the cards you already paid off again, you would face paying off the original debt plus additional new debt.

3.- It can be more expensive. If you consolidate your cards with a secured loan, such as a home equity line of credit, defaulting on your payments puts you at risk of losing your home or any other valuable possessions you have used to secure your loan. You should avoid putting at risk things, whose total value is greater than the amount of your credit cards.

4. – Negative effects on your credit. Consolidating debt can affect your credit score by changing your credit score. You do not eliminate debt, but combine it and it affects the balance of debt and available credit. If you close your paid credit cards, your score also suffers.

5. Some companies charge high service costs hidden in their contract, so consumers must sign up for a nonprofit program with a BBB-accredited company.


Bankruptcy can help you prevent foreclosure, no other program can do this. Hypothetically speaking, if a consumer enrolls in a debt negotiation or debt management program, consumers will increase their cash flow by helping them pay their mortgage by preventing foreclosure. Debt settlement programs can help you prevent foreclosure this way.

Bankruptcy can help prevent foreclosure, no other program can do this.

Bankruptcy can prevent wage garnishment.

Creditor harassment will stop after you file for bankruptcy, while with debt settlement it does not stop immediately.

Certain types of debts will be discharged with bankruptcy but this does not occur with a debt management or debt negotiation program.

Many times a consolidation remedies a symptom, but does not solve a major financial problem. Before determining if this strategy is right for you, explore the causes of your debt and assess other repayment options such as a Debt Management Program, self-payment strategies or working directly with your creditors.

1 Comment
  • Jaime M. Hyden

    What a wonderful post, you have put quite a lot of effort into this one, I can tell. Love everything about this, great post. Hope to see more such posts from you soon.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.