Start Consumer debt counseling debt consoladation consolidating

Consumer debt counseling debt consoladation consolidating

Credit card debt consolidation may save you money, but it’s often not free.

For it to truly help you get out of debt, you have to stick to the plan, whether that’s paying off your credit card balance within a 12-month promotional financing period or making sure you make payments as agreed for the entire five-year loan term.

Throughout the process, you can keep tabs on how your credit card consolidation plan is affecting your credit by reviewing your free annual credit reports and viewing your Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser.

And if you make your credit card or loan payments as agreed, you’ll establish a positive payment history, which affects your credit scores more than anything else.

(Payment history accounts for 35% of traditional credit scoring models.)Transferring credit card balances, paying off credit cards with a personal loan or enrolling in a debt management plan is only the beginning of credit card debt consolidation.

The best way to consolidate credit card debt — and whether consolidation will work for you at all — depends on your situation, so you might want to consult a non-profit credit counselor about your best options.

The following five tips can help you figure out which credit card consolidation strategy suits you best.

Promotional interest rates expire — like 12 months of a 0% APR on a balance transfer card — so make sure you can repay your debt within that time frame, otherwise you may not be saving any money at all.

The same goes for debt consolidation loans: Ask about any loan origination fees, and make sure the loan payment amount is something that easily fits into your budget.

Keep in mind a debt management plan may have a negative impact on your credit during the course of the program because your creditors will close or suspend your accounts while in the program, and this can affect your credit utilization.

So make sure you are ready to live credit card free for a while.

(Not every creditor has to participate, so you may be able to keep a credit card out of the debt management plan if you need it to remain open for travel or business purposes, for example.)Once you complete your plan, some of your creditors may re-establish your credit based on your new, debt-free status and the on-time payment history you established through the course of the debt management plan.