When you're struggling with mounting credit card debts, you may consolidate them into a single monthly payment. That'll make your repayments easier and get you out of debt faster. But before you consolidate bills, check out the 18 faq given here and get answers to the queries you may have on credit card consolidation.
How do I know if I qualify for credit card consolidation?
You need to contact a consolidation company. They'll arrange for a free debt counseling session where a consultant will analyze your financial situation and help you to find out whether you qualify for credit card consolidation.
What are the benefits of consolidation?
Consolidation offers the following benefits:
- Low interest rates and monthly payments on your cards.
- Single consolidated monthly payment that's easily payable.
- Reduction/elimination of late fees and over-limit charges.
Will creditors and collection agency stop harassing me?
Yes, creditors and collection agency will stop harassing you provided you keep up with the monthly payments while you're on credit card consolidation.
Can I avoid legal actions while I'm consolidating debts?
Yes. Creditors may not file a lawsuit or seek a judgment order while you're consolidating credit cards. This is because the consolidation program or loan will help you to meet your monthly payments so that you can avoid a default on your accounts.
How long does it take to consolidate credit cards?
The duration of a consolidation program depends upon the number of cards you have and the total amount you owe. Usually, it lasts for a period of 4-6 years. A debt consolidation loan takes quite a long time to get you out of debt.
Can I use credit card accounts while I'm on the program?
It is better if you don't use credit card accounts while you're on a consolidation program. This is because it will add to your dues thereby making it difficult for you to keep up with monthly payments under the program.
Will creditors send me monthly statements?
Yes, your creditors will send you monthly statements while you continue making payments to the consolidation company which negotiates on your behalf.
Can I increase payments while I'm on consolidation?
If your financial situation improves, let the consolidation company know about it. They'll talk to your creditors and increase your monthly payments so that you'll get out of debt faster. Similarly, if circumstances are not in your favor, you can talk to the company and have your monthly payment reduced so that you can afford it.
Can I send extra payments whenever possible?
Yes, you can send extra payments to the consolidation company. You need to inform them about the debt account towards which you're paying extra. They'll distribute the extra funds to the respective creditors.
What if I miss payments while I'm on the program?
If you miss a payment while you're on credit card consolidation, contact the representative at the consolidation company. He will contact your creditors or collection agency and work with them so as to lower your payments and make them affordable for you.
Do I have to be a homeowner to apply for a consolidation loan?
You don't need to be a homeowner in order to qualify for a consolidation loan. Apart from a mortgage (secured debt consolidation loan), there are personal loans available for consolidating credit cards. If you have good credit, you can easily qualify for a personal debt consolidation loan, which doesn't need you to keep your home as the collateral.
Does consolidation hurt my credit?
Since consolidation helps you to make payments that you can afford, therefore, it doesn't hurt your credit. Rather, it'll have a positive impact on your credit.
Can I leave the consolidation program if it doesn't work?
Yes, you can leave a consolidation program if it doesn't work for you. Once you're out of the program, you'll have to make specific arrangements with your creditors in order to pay off your bills. Otherwise, late payment fees/interest charges will be added to your account again and creditors may start harassing you with frequent calls.
Will the interest rates reduce if I use credit card consolidation?
This is one the major advantages of credit card consolidation. You will surely get reduced interest rates. It will help you to lower monthly payment and pay off your debts sooner.
How do I choose a credit card consolidation company?
While looking for a good credit card consolidation company you need to be sure about the company and check if it’s reliable. Following are few points you must keep in mind:
- Privacy and security measures of the company
- Service background of the company
- Accreditations received by the company
- Online review about the services of the company
- Proper contact details of the company
- Client testimonials found on the company website
How will I know if my account goes to collectors?
Your credit report will have the details if your creditor has sent your account to a collection agency. You can get your credit report from any of the below mentioned bureaus:
Is it going to take a longer time if I consolidate my credit card?
You can reduce your monthly debt by consolidating your credit card but lower interest rates are not the sole reason behind it. If your new monthly obligation is reasonably lower, it usually means a longer repayment term. Obviously, if your repayment is extended you are going to take longer to pay off your credit card debt.
What are the negative impacts of credit card consolidation?
There are disadvantages attached to any kind of debt solution. The worst impact is on the credit score. The credit score will surely go down if you use credit card consolidation. On the other hand, it’s far better choice than bankruptcy.