If you are feeling overwhelmed by credit card debt and are having trouble making minimum payments, you may want consider consolidation to make your payments more manageable. Consolidating your credit cards and loans will help you take high interest cards with hefty balances and combine them into one payment.
Step 1
Run a free copy of your credit report at annualcreditreport.com. Highlight every account that is considered revolving, such as a credit card or store credit account. Note the amount of the balances and compare this amount to your own records. Make sure you have a minimal amount of late payments.
Step 2
Gather your credit card statements for the past six to 12 months. Look for red flags on your accounts, such as transfer fees, annual fees and high interest rates. These are the cards you will want to pay off and eventually close.
Step 3
Look for a current credit card account that offers a zero percent introductory interest rate on transferred balances. If you don't have one, go to bankrate.com to locate a card with this type of offer. When applying, you will have to have a low debt-to-income ratio, sufficient income and a good credit history in order to be approved. You can choose to transfer all of your high balances to this card if you have a high enough credit limit available. Even if the card takes transfer balances and is lower than your other cards, transferring and consolidating the credit card debt will save you money with the lower interest rate.
Step 4
Contact your financial lender about a debt consolidation loan. This can be feasible if you have a good credit rating. Your financial lender will be able to pay off all of your debt, but you will obtain a new debt with a lower interest rate and no yearly fee. Your credit accounts will be closed, but it will be easier to rebuild your credit because you will still have the loan that you will be making regular payments on. Payments can be adjusted based on your pay schedule, such as bi-weekly or monthly.
Step 5
Seek debt consolidation directly. These businesses help struggling credit card holders by working with the creditors directly. They combine balances from all of the cards and close the old accounts. While it can offer relief to struggling credit card holders by eliminating multiple fees and high payments, they extend the amount of time it takes to pay off the balances. Initial and yearly fees may be high, but they are generally incorporated into the balance so that it remains affordable for debtors.
Tips and Warnings
- If you choose a zero or low interest credit card to transfer your balance, try to make double payment or pay more on the balance as often as necessary. This will allow you to avoid paying any interest or added fees on the loan.
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