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Hello. I am thinking of consolidating my credit cards and was wondering if it would be good for me or not.
Here's my situation:
I have 4 credit card balances totaling $9091. Of the 4 credit cards, one of the credit cards I have 0% APR til next may($1200 balance) which I should be able to pay off no problem. The other two are 11.99% APR and one of them is 9.99% APR. The Minimum monthly payments are $53, $52, $49, and $20(for 0%).
Would it be a good idea to consolidate by using non for profit consolidation company like incharge.org? They said that if I pay $250/mo. to them, I will have $9091 paid off in 3 years.
Also, If you say I should consolidate, should i include the 0% APR card in the consolidation? Would appreciate any advice, thanks.
Last edited by dc1225; 08-14-2008 at 10:07 AM..
Reason: update
Just start running a debt snowball. The basic idea is to set an amount that you can put toward your debt every month. Then you make minimum payments on all of your cards except one, which gets the rest of the money. You can either go the Dave Ramsey route and pay off your smallest debt first, then the next smallest and so on. Or you can go the Suze Orman route and pay off the card with the highest interest rate first, and then the next highest, and so on.
Say you have $250 a month to put toward debt and you decide to pay off the $1200 balance first to make sure you don't get hit with interest next May. You pay $53, $52, and $49 to the other three cards. That leaves you with about $100 a month to put toward the no interest card. When that card is paid off, you decide to pay off the card with the $49 minimum next. So you pay $53 and $52 to those cards and remaining $150 goes to the $49 card. When that one is paid off, you put $53 toward that card and $200 toward the $52 card.
You don't need to use the debt consolidation companies for anything. And make sure that once you start paying off the cards you don't use them any more. You can pay it off faster if you can send more that $250 a month to the cards.
Make sure you definitely pay off that 0% in time, as it could be one of those ones that charges you back interest on the remaining balance - and upwards of 20-25%. I've had offers like that, although they were generally store credit cards.
I agree with Sean's approach. Makes a lot of sense. One drawback of doing a debt consolidation is there might be an inquiry into your credit history, which could knock a few points off your credit score. Something to consider if you're going to be in the market for a different kind of loan in the near future.
Just start running a debt snowball. The basic idea is to set an amount that you can put toward your debt every month. Then you make minimum payments on all of your cards except one, which gets the rest of the money. You can either go the Dave Ramsey route and pay off your smallest debt first, then the next smallest and so on. Or you can go the Suze Orman route and pay off the card with the highest interest rate first, and then the next highest, and so on.
This isn't a bad idea, but it really is a dumbed-down way to get Americans to feel good about paying off their debt. However, I'm for whatever will motivate people.
If you do the snowball method, please taken Suze Orman's route and pay off the highest interest card first. It will save alot more money than simply the lowest balance (lunacy)
If you do get a consolidation loan, WHATEVER YOU DO, DON'T CONSOLIDATE THE CARD WITH 0% interest! And you only do a consolidation loan if you're getting an improved interest rate, so first, you should see what banks would be willing to give you. A consolidation loan's upside isn't simply in having 1 bill to pay, but rather, will it save you money? Otherwise, it's just a mind-game.
I put your data into a calculator, assuming each of the three non-zero cards had about $2630 on it. You can pay them off by paying $256.13 a month for three years, without having to use a credit counseling service, and this will tell you how much to pay each month.
Guys, thanks for the info. Yeah, I know what you're talking about Sean. I had researched that as well and that was one of the options i was considering, leaning toward and which I probably end up doing unless someone else has a better idea.
This isn't a bad idea, but it really is a dumbed-down way to get Americans to feel good about paying off their debt. However, I'm for whatever will motivate people.
If you do the snowball method, please taken Suze Orman's route and pay off the highest interest card first. It will save alot more money than simply the lowest balance (lunacy)
If you do get a consolidation loan, WHATEVER YOU DO, DON'T CONSOLIDATE THE CARD WITH 0% interest! And you only do a consolidation loan if you're getting an improved interest rate, so first, you should see what banks would be willing to give you. A consolidation loan's upside isn't simply in having 1 bill to pay, but rather, will it save you money? Otherwise, it's just a mind-game.
Good luck. I know you can do this.
Thanks Puddy, yeah I am fully aware of it! But you think that I will be better off by paying off the card with highest interest rate and balance?
One drawback of doing a debt consolidation is there might be an inquiry into your credit history, which could knock a few points off your credit score. Something to consider if you're going to be in the market for a different kind of loan in the near future.
I wouldn't worry about this at all. We get credit inquiries for plenty worse and taking control of your credit card life isn't something to be penalized on if anyone knew either. You may have a credit inquiry on there, but as long as you don't have a bunch, it's not a big deal -- and the upside is in consolidating and being responsible, you're improving your credit score.
I put your data into a calculator, assuming each of the three non-zero cards had about $2630 on it. You can pay them off by paying $256.13 a month for three years, without having to use a credit counseling service, and this will tell you how much to pay each month.
thanks for the calculator! this is one of the better calcualtors i've used. Yeah, I didn't think I was a candidate for consolidation as I have a "good" credit score, nobody is calling me, Im not late on min. payments...but that "interest lowered" and one payment offering by consolidation company sounded good. I just wanted to hear what everyone else thought as well. Thanks!
Thanks Puddy, yeah I am fully aware of it! But you think that I will be better off by paying off the card with highest interest rate and balance?
Number your cards on a piece of paper. Line them up like Sean said with the snowball effect, but place them in the order of highest interest rates first and lowest at the bottom. The one at the top is your obvious priority because by dumping it quicker, you'll save more money.
You can research snowball effect on Wikipedia or something for details on how much to place on each, but that's something you have to answer personally -- not sure how much you're willing to put down.
I just got out of debt a few months ago and know that you will too. Good luck.
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