“I Need To Consolidate My Debt” – Ever Heard That Statement Before?
I don’t know about you, but consolidate my debt makes me shudder.
Regardless of how effectively you organize your financials, sometimes you’ll find yourself an unwilling participant of ill-fated financial conditions.
Whether it is the overall economy or similar economical hardship, eventually you might consider a method to ease your monthly payment pressure.
Perhaps it will cause you to speculate: should I merge my debt? And in case I choose to combine my debt, how can I achieve this in a way that is risk-free, affordable, and beneficial to me over time?
Although the financial landscape may look to be complicated to start with, the answers to your debt consolidation queries and issues will be reasonably clear-cut.
Consolidate My Debt… But First I’ll Need An Up To Date Personal Profile
“When someone comes to me and says ‘I need help to consolidate my debt’ I first ask them to fill out a financial profile that lists all of their monthly payments, the balances they owe, and the interest rates they’re paying on each loan or credit card,” says financial adviser and business writer Carl Walins.
“Then when they’ve got all the information laid out on paper, we can begin to prioritize their debt. We look for opportunities to quickly pay off small loans with high interest rates and to consolidate larger loans or cards into a single credit card or loan that offers a lower rate”.
And What Does Carl Have To Say?
For example, Carl suggests as you think about “It it time to consolidate my debt?” you should consider your credit cards immediately, because these typically carry the maximum annual percentage rates.
To begin with assess if, or if not, you will have the opportunity to lower your Interest rates through incorporating the balances of several big interest rate cards onto a single, lower-rate card.
If you have several credit cards with balances of $2,500 and interest rates of 18%, 19% & 20%, you might look into transferring these balances to a solitary credit card which has an interest rate of around say 13%.
Certainly you will save a considerable amount of cash in yearly interest rates through shifting to the lower-rate card — provided that the 13% rate isn’t a short-term “intro” which will end and shoot up to a greater rate before you’re able to pay back the balances.
How is Your Credit Score?
Walins also advises that you may consider a debt consolidation loan in order to pay off higher-interest debt.
He says that lenders may offer you a much lower rate based on your credit history, and if so you may consider taking one loan to pay off several other outstanding amounts that bear a higher interest rate.
Using the credit card examples, you may find that you can get a $5,000 unsecured personal loan at a rate of 12%. Securing that loan would allow you to payoff the high-interest credit cards and reduce your monthly payment burden.
Maintain Just One Credit Card For Urgent Matters
And yet Carl cautions regarding one of of the pitfalls of debt consolidation. “Anytime an individual comes to me and says ‘please help me to consolidate my debt’ and we’re ready to repay the high-interest cards, I tell them to cut up all but one of their cards and to save it for crisis use only”
I have a basic rule, I never, ever use credit cards with nil balances to consolidate my debt, it’s a temptation which you simply don’t wish to fall victim to.
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