Definition of consolidating credit card debt
Mistakes To Avoid If you want or need to consolidate, be aware of the following..Don't use a home equity loans, says Roberta Lee-Driscoll, a certified financial planner in Honolulu; “if someone has five credit card debts and they consolidate it into a home equity line of credit that is a no-no.” That's because credit card debt is considered unsecured debt, meaning – there is no collateral to back it up.However, when your debt gets out of hand and you find yourself juggling multiple cards and loans, it can be exhausting. Debt consolidation could help you to combine your outstanding debts into one convenient loan potentially at a lower rate than you currently pay.If this sounds familiar, there are actions you can take to rein in your debt and pay it off sooner. Simply put, that’s one loan, one regular repayment, one interest rate and one set of loan fees.Arnold Graf, a certified financial planner with NEBSCO Financial Services, says debt consolidation may be a good idea for people who have sufficient equity in property and are credit worthy, but adds “usually people that consolidate are close to bankruptcy and are trying to push their debt further out as long as they can.” Consolidating debts is basically just buying time, he says, adding that “you have to consider whether you are willing to pay less now but for a longer period of time.” Gail Cunningham, a spokesperson for the National Foundation for Credit Counseling, says, “Debt consolidation is always a good idea on paper.You are presumably taking higher interest credit card debt and rolling it into a lower interest loan [so] instead of paying many different debts each month you are paying one.” However, she said “in practice, unless you are a very disciplined person debt consolidation isn’t going to work.” “We see the most well-meaning people trying to be financially savvy and roll all their bills into a debt consolidation loan,” says Cunningham, but come the next year they are back to running up debt on a credit card that they rolled into the loan while still having to paying the debt consolidation payments.There are two main types of personal bankruptcy: A debt collector generally is a person or company that regularly collects debts owed to others, usually when those debts are past-due.
Yet since bankruptcy has far-reaching and long-lasting results, you should first consider other debt management options.Step 1: Gather information about all your debts To take control of your debt it is essential to know how much debt you have.Review your statements and work out the following: Step 2: Work out how much you can put towards paying off your debt each month Next, it’s good to know where your money is going and how much you have coming in. Are you worried about losing your home or your car? Many people face a financial crisis at some point in their lives. Are your accounts being turned over to debt collectors?