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Question DetailsAsked on 4/14/2014

Is Debt consolidation a good idea if you have good credit but pay so much a month in credit card bills?

Debt consolidation

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2 Answers

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Sure - IF the terms are more favorable on the whole than you are paying now. Most debt consolidation companies are keyed to poor credit situations, so take you for a LOT of processing costs and high rates. Of course the best way to save the debt cost is to cut your credit card use in the future back to only what you can and will pay off each month or less, otherwise you are just on a never-ending escalating credit card debt ride. Carrying a credit card balance, except in the rare emergency like travel or medical emergency, is a terrible way to manage money - it is expensive money, and the compounding interest just eats you alive in no time flat.


If you have good credit, you should be able to go to a credit union you belong to, or a bank, and get a consolidation loan, though depending on your credit card rates may or may not be a bargain. The key is to figure your timing and amounts and rates on each debt and the present worth of each debt at those rates, then make sure you get a consolidation loan that gives a lesser present debt worth. Commonly, what you find, with say loans and credit card debts from maybe 1-10 year loan payoff scheduled, you may get a lower rate on a consolidation loan than some of your loans (like credit cards) but higher than others (like car), and for 10 years, so the overall payments on the consolidation loan would actually be higher.


If you have the cash to do so, you best bet is always to make extra payments to pay off the higher-rate loan first, then work your way down to lower rate ones. If you have a mixture of high and lower rate loans, then sometimes the best bet is to consolidate only the high-rate ones and maybe ones with a balloon rate term, and keep the others intact at lower rates.


You can find good articles on loan consolidation at bankrate.com and money.com (Money magazine) and many larger bank websites, along with calculators to allow you to compare various options.


One other thing to remember - if you consolidate several loans into one, you may save money but you lose the flexibility of then paying off the higher-rate one earlier if you are able.


You can also get good info and budgeting help at your local FREE credit counseling non-profit.

Answered 5 years ago by LCD

0
Votes

BTW - here is a recent question relating to this issue fyi:


https://answers.angieslist.com/Does-N...

Answered 1 year ago by LCD




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