Tuesday, April 23, 2019

Ideas for Debt Consolidation Truman Advisors

What exactly is debt consolidation and when do you need to think about utilizing it?  Debt consolidation works when it lowers the interest rate and reduces the monthly payment to an affordable rate on unsecured debt such as credit cards.  If you had had enough of watching your credit card balance rise every month plus the balance has reached levels that are starting to overwhelm you while you are weary of the anxiety this is bringing into your life every month, and you just need a plan you can follow. At that point debt consolidation is something you should strongly consider.

Here are some ideas with Truman Advisors to help with debt consolidation. 

One common strategy is debt consolidation, rolling multiple debts into a single loan or credit card at a lower interest rate. Consolidation works best for high-interest-rate debts such as credit cards. Households that carried credit card debt last year had balances averaging $16,748, according to an annual study by NerdWallet.

A basic budget allocates money for debt payments, an emergency fund and contributions to retirement savings, but that isn’t enough when consolidating, says Lara Lamb, a certified financial planner at California firm Abacus Wealth Partners.

Quit using your cards is a cardinal rule of consolidation is not using your credit cards as you pay off debt.

Locking away cards doesn’t mean closing accounts, which could hurt your credit. The one exception to the no-use rule is a nominal charge on your card every few months — paid on time and in full — to keep the account active and your credit intact, says Shawn Tydlaska, a certified financial planner at California firm Ballast Point Financial Planning.

Balance transfer cards let you shift over debts from other cards and charge no interest for a limited time — the best ones offer from 15 to 21 months — after which a double-digit interest rate kicks in. Most cards charge balance transfer fees and require good credit scores and high incomes to qualify.

Also remember to think about a few simple questions:

How much debt do you have? Gather all credit card statements, and add up how much debt you owe to your creditors.

How much can you realistically put toward paying the credit card monthly? The goal is to pay off debt quickly, so tally up how much you can afford to allocate monthly.

How long is the introductory low-APR window? A longer APR duration gives you more time to pay off debt before the rate reverts to the standard, and usually much higher, APR.

Lastly a tip from Discover is 0% APR doesn’t mean FREE

While a 0% intro APR is a great way to pay off credit card debt faster, and save on interest payments, it’s not free like most consumers think. Balance transfer fees are typically charged, which range from 2 to 5 percent of each balance transferred.

In most cases, despite the upfront costs, you’ll still enjoy substantial savings in the long-term. However, it’s something to consider when deciding if credit card consolidation is right for you. 

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