The key to debt consolidation is the calculation: if you can determine that the interest rate is lower than your current interest rate + the balance transfer fee, then it makes a lot of sense to move your debt to this card or loan. The added benefit of having all your bills in one place is also a consideration. Let’s see under what other conditions it is sensible to pursue debt consolidation.
Best Ways to Consolidate Your Debt
Since the goal is to reduce your monthly payments, one of the first things you should do is find a balance transfer credit card that has a 0% interest rate for a specified promotional period – usually between 12-18 months. If you can rectify your total debt within this time frame, then you’ll end up a lot better than you started financially. Generally, your credit score needs to be in the range of 690 to secure a balance-transfer card with a superior rate overall.
Alternatively (or even concurrently), you can opt for a debt consolidation loan. Again; the better your credit score, the better the interest rate you receive. Obtain the loan, pay off all your credit cards, and then of course recompense the loan in the usual monthly installments. This will reflect positively on your credit report and further improve your FICO score.
Make Sure Debt Consolidation is a Wise Move
This of course varies from situation to situation. To ensure that debt consolidation is a wise move for you, make a short checklist of the following:
Check your credit! Make sure that it is high enough for a consolidation move to be profitable – you won’t qualify for a 0% introductory rate if your FICO Score is too low.
Can you make the necessary cash payments monthly? Use a debt consolidation calculator to make certain.
Plan to be able to pay off your debt within 5 years with the loan.
Lastly; you always want to make sure that your liabilities do not subsume more than half your monthly income.
For more information, contact the financial experts at Crimson Stone Capital Solutions.