Stop Making Multiple Monthly Payments And Simplify Debt With Credit Consolidation

What is credit consolidation?

If you have a few different loans from a few different lenders then you will be making a payment to each of these lenders every month. The interest or annual percentage rate (APR) that you are paying each lender will vary, and you there may be cheaper credit available. That is what credit consolidation is all about. You combine your unpaid balances into one amount, through a new line of credit at a lower interest rate. Instead of making several monthly payments, you make one.

How do I start the process?

The simplest way to consolidate your debt is to find a debt counselor in your local area and consult with them. The expert you choose should be certified and trained in debt management.

What is the new line of credit likely to be?

Most debt counselors will recommend a zero interest credit card as the cheapest solution for debt consolidation. The card issuers will assess your existing debt and decide if they are prepared to offer you a zero interest credit card. If your application is successful, the card lender will pay off the existing lenders and you will be left with just one monthly payment to make to the credit card issuer. The other big benefit of this is that whatever your total debt is, the amount you owe will not increase for the life of the zero interest credit agreement.

Are there any risks with a zero interest credit card?

As with all credit, if you do not make your monthly payments for whatever reason, there will be penalties. With a zero interest credit card this can mean that the APR will become applicable with immediate effect. It will override the zero interest period and you will be back to paying interest on your balance. This can be quite high.

Any other tips?

When you work with your debt counselor make sure you understand the terms of any new credit line that are being offered. If the counselor does recommend a zero interest credit card make sure you know how long the zero interest period is for. Some cards offer interest free periods of up to 21 months but many will be for a shorter period. You should also be sure to understand what the APR is for any new expenditure that you put on the credit card. Typically the zero interest clause in your agreement is only applicable to the balance that you transfer and not for new purchases.