We have nine credit cards. Now that I am disabled from an accident
we want to pay them off, but we have to somehow get them together
and pay a set amount each month. How do we do this? Should we call
individual companies, or is there some agency that can help us?
When you consolidate your debts, you're looking to reduce the interest
rate or extend the loan term. Since credit card debts don't have
defined loan end dates, revolving credit can stay with you for what
seems like forever if you just make the minimum payments. What you
really need is a lower
interest rate credit card.
Think about it. Let's say that you have $10,000 in
credit card debt spread across the nine cards. If all the cards
require a 2½ percent minimum payment, then consolidating
the cards into one card isn't reducing your minimum payment. (Most
credit cards have a required minimum payment somewhere between 2
and 3 percent of the outstanding balance.)
Using a home equity loan or a home equity line of
credit (HELOC) could lower the interest rate, especially if you
can use the mortgage interest deduction on your taxes, but you put
your home at risk if you are unable to keep up with the payments.
The home equity loan can also reduce your payments because the required
monthly payment will be less than 2 percent of the loan amount.
If your credit history is in good shape, you may be
able to consolidate the debt with balance transfers to a new credit
card. Get a copy of your FICO Credit Score and Experian credit report
from Bankrate's Shop
& Save Channel to see where you stand. A low introductory
rate will also have more of your monthly payment going toward paying
down the loan balance vs. paying interest.
Consumer credit counseling can consolidate your debts
and work out a repayment plan. The counselors may be able to also
reduce the interest rate on your debt. Taking this step will damage
your credit history because your credit report will show that your
accounts were not repaid according to the terms of the credit agreements.
Don't take this step lightly, but if you can't keep up with your
bills this is an alternative to bankruptcy.
has information that will help you choose a credit counselor, and
you can learn more about credit counseling on the National
Foundation for Credit Counseling Web site.