If you have several high interest credit cards or other bills that you are having problems making payments for each month, you may want to check into the possibility of debt consolidation. You could either use a “do-it-yourself” method by approaching a lender to take over the payments, or use a debt consolidation service.
Or, you could use a low-or-zero-interest rate credit card for consolidation. You may be able to do this if your credit score is still intact, by applying for the new card and sliding your balances onto it.
One benefit of this is that your monthly payment will be lower, and the creditors will stop calling you when you start making monthly payments on time. Since your current interest rates are reduced or at zero, more money goes toward your principle payment. This is figured into the equation, so the total amount you pay monthly is smaller. By paying the one bill on time, you will avoid late fees and over-the-limit fees.
You will only be paying one bill each month, which is much easier than struggling with different due dates and an inadequate cash flow. You will have avoided bankruptcy, too, using an entirely legal method to do it.
Watch out for transfer fees that are a percentage of the amount transferred. This could take away much of the savings resulting from zero interest on the new card.
If you miss a payment, the credit card company may increase your interest rate drastically. Remember, too, that the zero interest will only be valid for a short time, not for the life of the card. After the six months or year is up, the interest rate will go up significantly.
Another benefit of consolidating your debts through use of a credit card is that you don’t have to worry about the effect something like the debt consolidation program will have on your FICO score. Initially, since you may have missed payments, your score will be down, but as you continue to make your payments on time, it will recover.
Paying off your debt this way will have a positive outcome on your credit score. However, if you miss making payments, you will be back where you started.
That means you must also restructure your personal spending habits so your program will be a success!