1. If you spend more than 50% of your credit limit every month, this indicates to the Credit Bureau that you do NOT have enough cash on hand to meet your monthly expenses. This will identify you as a high credit risk and will actually reduce your credit score by 60 - 70 points overnight (Fair
Isaac).
2. If you miss 1 or 2 payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27% -
30%!
3. Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have at least 2 credit cards and 14% of them have 10 or more credit cards.
What is debt
consolidation?
The idea behind debt consolidation is simple. You take a number
of small, high interest debts, such as credit card balances, and
merge them into a single debt consolidation loan. The interest
on the loan is lower than on the small debts. Your monthly
payment goes down, saving you money. As a result, you can pay
off your debts sooner.
Types of debt consolidation
There are two main types of debt consolidation loans: secured
and unsecured. With a secured loan, you have to put up an asset,
such as your home or your car, to get the loan. Secured loans
generally have much lower interest rates than unsecured ones.
This is because the lender is taking less of a chance in lending
you money. If you cannot make payments within the allotted time,
the lender has the right to take whatever asset you used to
secure the debt. A secured debt consolidation loan can save you
thousands of dollars in interest fees. If you have credit cards
with double-digit APRs, you can consolidate them into a single
loan at a lower interest rate.
However,
borrowing money against your home
can be risky. If you do not keep up with your payments, you
could end up without a place to live. Before considering this
option, make sure that you can make the monthly payments. Resist
the temptation to borrow more than you need, even at a favorable
rate. Find out the exact amount that you will have to pay by the
end of the term of the loan. It may be more than you think.
Video: Understanding Debt Consolidation
The other type of loan is an unsecured loan. As the name
implies, you do not need to put up an asset as collateral to get
the loan. Because of this, the interest on unsecured loans tends
to be high. If you are considering debt consolidations, chances
are that you have a less-than-perfect credit score. This will
also affect the interest rate.
However, even an unsecured debt consolidation loan may have a
better interest rate than your credit cards. Make sure that you
use a reputable lender and shop around before settling on a
credit union or a bank. If you’ve been with the same bank for
years, they may offer you a better rate just to keep your
business. But if someone else offers you a better deal, don’t
feel like you have to stick with the bank you know.
Other options
Before
taking out a debt consolidation loan, you should consider a few
other options. Call up your credit card issuer and ask for a
better interest rate. If you tell them that you are considering
switching to a different card, they may oblige to keep your
custom. If you have credit card debts and a good
credit score,
you may be able to get a new credit card with 0% APR. You can
save a fortune simply by transferring your balance.
Did you know that you can borrow money from your nest egg,
free of charge? If you have an
IRA
or a 401(k), this may be a good temporary option. You can use
the money in your IRA for up to 60 days interest-free. Only do
this if you’re sure that you can return the money to the account
within that time.
The idea behind debt consolidation is simple. You take a number
of small, high interest debts, such as credit card balances, and
merge them into a single debt consolidation loan. The interest
on the loan is lower than on the small debts. Your monthly
payment goes down, saving you money. As a result, you can pay
off your debts sooner. 
Before
taking out a debt consolidation loan, you should consider a few
other options. Call up your credit card issuer and ask for a
better interest rate. If you tell them that you are considering
switching to a different card, they may oblige to keep your
custom. If you have credit card debts and a good
