Warning signs when to consolidate credit card debt and how to do it

If you’re over your head in credit card debt, you need to find ways to get out of it. Otherwise, you will start getting collection calls, and the debt collectors can file a lawsuit against you.

Credit card debt consolidation can be the most helpful option. In most cases, most people don’t realize when they have to consolidate their debts. They often start finding debt solutions when it is too late.

What are the warning signs you should consolidate credit card debt?

Here are some financial situations that are warning signs for considering credit card consolidation.

When you’re unable to bear your multiple cards

When you’re unable to manage payments on your multiple credit cards, be sure that you need to consider the credit card debt consolidation option.

Credit card debt consolidation is perhaps the easiest way of combining your debts and make repayment easier. If you’re not being able to remember the due dates of so many accounts, you can easily benefit from the credit card debt consolidation process.

When you’ve racked up a huge amount of penalties

If you’ve been a reckless spender and used your credit cards randomly without paying back the bill, it is most likely you have racked up a huge amount on your multiple credit cards. If you want to waive off all fees and penalties, consider the credit card debt consolidation option.

If you take out a consolidation loan, you can even roll over all the costs and make sure your monthly payments are lowered.

When you’re tired of sky-high interest rates

Studies reveal that the maximum number of credit card defaults is due to the sky-high interest rates on the cards. In such a situation, you will be able to resort to debt consolidation and reduce interest rates. If you enroll in a debt consolidation program, your consultant will negotiate with your creditors and lower the interest rates. A debt consolidation loan, on the other hand, will itself carry much lower interest rates and thereby lower your monthly outgoing obligations.

If you have no other option other than filing for bankruptcy

If you’re on the verge of filing for bankruptcy and you don’t know how to manage your debt burden, you can run to the credit consolidation companies. You can get back on your monthly payments and boost your score thereby bringing back a grip on your finances.

What are the ways to consolidate debts properly?

So, once you know that you need to consider credit card debt consolidation to repay your debts, then you should learn the ways to consolidate debts properly. Knowing the proper ways can help you to consolidate debts on your own.

Below are some useful ways to follow to consolidate debts.

Check your credit report first

As you know, the lending industry is entirely based on credit score, so you need to check your score before taking out a debt consolidation loan. Check the errors in your credit report and dispute them so that you can boost your score as much as possible. You also need to know your debt amount so that you can understand the loan amount you need to get a grip on your finances.

Find a reputable debt consolidation company

If you consolidate your credit card debts with the help of a debt consolidation company, then you need to find an authentic debt relief company. You can verify whether or not it is registered with the BBB. Many trustworthy companies are registered with the BBB and this way you can distinguish between the good and the bad ones. If you find the company is not registered, then it is a scam.

Avoid lenders who seem predatory

If you come across predatory lenders who are sitting to snatch money from you and drain off your wallet, stay away from them. Remember, according to the rules of the Federal Trade Commission, non-profit debt consolidation companies cannot charge advance fees before providing you with their services. Therefore, if you’re paying upfront fees, make sure you protest and inform the FTC about this violation.

Create a comprehensive market research

Before you take out a consolidation loan, you have to do comprehensive market research so that you can take out the loan with the best possible rate that can save your dollars throughout the repayment period of the loan. It often happens that you take out a debt consolidation loan and then end up paying more on the accumulated interest rates throughout the extended term of the loan. Make sure that this doesn’t happen with you as you may end up in a further mess.

Check the rate of the loan

The interest rate of the loan is the most important factor that needs to be checked by the borrower so that you don’t end up taking out a loan that is beyond your affordability. When a debtor takes out a debt consolidation loan, his main aim is to bundle his credit card debts within a single and affordable loan that offers him a lower interest rate. While this is the goal, taking out a loan without comparing the interest rates offered by different lenders is just foolish.

Make monthly payments on time

Though you may have forgotten to make timely payments on your multiple credit cards, this might be the reason for defaulting on your credit card obligations. But if you carry on with the same habit while making payments towards debt consolidation, you may fall into a mess. Keep reminders on your cell phone so that you can repay on time and avoid any kind of a mess.

Lastly, remember that taking out a consolidation loan or considering debt solutions is not enough. You should manage your personal finances so that you can make timely payments on the loan or to the company. Once you miss a payment on your debt consolidation loan, it hurts your credit score badly, or the entire agreement with the debt consolidation company may also get canceled. You may end up wasting the dollars. So, learn ways to manage money and credit cards properly so that you can avoid accumulating new debts and manage your ongoing debt properly.