Loan Consolidation: Consolidating your Credit Card Debt
Credit card debt is a growing problem, with several companies reporting over 50% of their accounts being 90 days or more past due. If you are one of those people who have overextended yourself with credit cards and can't figure out what to do, a credit card loan consolidation program might be just what you need.
With a credit consolidation program, the goal is to take all of your loans and to combine them into one monthly payment that you can pay off in just a few years (about 3-6 years in most cases). By consolidating your debt you can often qualify for a lower rate on the single loan because of the larger amount.
Before you agree to consolidate, always do your homework to make sure the new loan isn't costing you as much or more than the individual loans were. There are disreputable companies out there that will try to avoid giving you the best rate, so shop around before making a decision and don't sign on the dotted line in an emotional moment only to regret it later. By figuring the total monthly payments you are currently making you can easily compare that to the proposed consolidation amount, thus determining which the best option for you is.
When you have a consolidation loan, it is very important that you make your monthly payments on schedule. Your payments will no longer be sent to your creditors. Instead, you pay the consolidation company who then in turn pays the creditors on your behalf. To not do send in your payment as promised is to put your status in jeopardy once again and the creditors may resume their collection activities or raise your interest rate because you have not maintained your end of the bargain. By staying in touch with your credit counselor (or "consolidation specialist") and keeping them abreast of any situations or changes, you can most likely avoid having your account turned over for collections.
Though your consolidation program is making your payments for you, it is still your responsibility to read the monthly statements from your creditors. Your interest rate should be reduced and you should no longer be accruing late fees. If either of these doesn't look right or the consolidation company isn't paying the right amount, contact your counselor to discuss the problem. company is paying your creditor the right amount.
There are quite a few different debt consolidation loans, and the right one for you will depend on your specific situation. Some loans have a higher monthly payment for a short period of time while others offer a lower payment spread out over several years. Let common sense prevail here and look for the loan with a monthly payment you can afford.
Some loans will have a fixed interest rate and will not allow you to make extra payments over time. If at all possible, find a loan consolidation program that will allow you to pay more when you can!