Having all your debts combined in an unsecured credit card consolidation lowers monthly payments, reduces interest rates, and makes it easier to pay off past due bills by having only one monthly payment. Consolidating can be done with or without professional assistance.
To handle the consolidation on your own, start by contacting creditors and negotiating lower interest rates. Next, begin prioritizing debts in order of severity; address the credit lines in collections or those close to being sent to the collections department first. If balances are being collected on, they are also close to becoming a legal issue.
Organize a payment structure consistent with earnings. Even if harassing phone calls are bombarding the home day and night, the biggest priority is making the house or apartment payment, and making sure the family is fed. Credit card payments should not come before basic necessities.
Once the budget is set, inform each company of the payment amount if it is lower than the required minimum. Some companies will collaborate with the debtor for a specific period of time to help them get their account back in good standing. Once established, adhering to the terms agreed on is essential to prevent the account from going to collections.
Any debt being collected on by a third party agency has the potential to become a matter for the courts. If it is not possible to pay the offered settlement amount, work with the agent to find a reasonable alternative. Set up a short payment plan or a specific date to pay, and ask when the matter will become a lawsuit. The collections company usually has a limited amount of time to clear the account before suing on behalf of the creditor.
Begin consolidating small credit card balances by transferring the amounts to the credit line with the lowest interest rate. If need be, open a zero interest offer from a creditor and transfer balances to it. Be careful about the expiration of the offer and the amount of interest charged when the rate adjusts.
If one account can not bear the sum of the others, spread it out, but continue to reduce the number of open lines. When a balance has been fully transferred, do not close it. Open lines of credit in good standing will contribute positively to credit scores and history.
Tips to Remember
Tackle the highest interest rate account or those in collections first. These have the potential to cause the most damage to your credit and bank balance. If a debt settlement offer is received by a third party, make sure they verify it before paying. For the remaining balances, choose one and pay double or triple the flat minimum going to the other cards. When it is cleared, transfer the larger payment to the next, until all balances are at zero.
Start by organizing debts and being honest about with yourself and creditors; chart progress and reduce the number of payments by consolidating unsecured debt. Follow this plan, and your credit will gradually improve.