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What You Need to Know Before Consolidating Debt
by Daniel Cohen
Consolidation of credit card debt is one of the best ways in which you can get rid of credit card debt. You will see a lot of advertisements from financial eagles and credit counselors as to how you can cut down your interest rate and save those p

Consolidation of credit card debt is one of the best ways in which you can get rid of credit card debt. You will see a lot of advertisements from financial eagles and credit counselors as to how you can cut down your interest rate and save those precious dollars with the help of debt consolidation.

No doubt, consolidating your credit card debt is helpful. However, it does come with a price. It is actually a repayment concept that works to your advantage if you adhere to a certain set of rules and guidelines. Here are some of the important things that you need to know before consolidating debt:

1. Find the reason: You should aim to nip the problem in the bud so that it does not recur again. You should take advantage of the debt consolidation plan with the foresight that you do not find yourself in a debt trap again.

2. Save for the rainy day: There comes a time in our life when we are caught unawares. There are emergences in life, tragedies, a job loss or natural disasters that will trigger a huge amount of expenditure, which most of us inadvertently charge on a credit card, thereby attracting a huge amount of interest rate. Make it a point to save about 10 percent of your take-home salary as a reserve to meet those unforeseen expenditures.

3. Check your overspending habits: Credit cards make us liberal with our spending. Research has found that most of us spend a lot on travel and food. Track your expenditure and use your credit card wisely. If you have time, then take a walk instead of using your car and blowing up your credit card money on gas. Your credit card counselor will give you wise tips on how you can adhere to a budget plan which will cut costs and help you stop being a slave to your credit card.

4. Planned events: Major events like wedding, honeymoon, childrens education and vacations should not be charged to a credit card. Plan these events wisely and start saving early to accumulate money to meet for these events.

5. Terms and conditions of consolidating debt: Do not be driven by the fact that if you collate all your outstanding payment into one low monthly payment, you will get a good deal. Look at the interest rate, fees and the tenure of the loan. The tenure of the loan can affect how much you will be paying monthly and how much extra you will be paying for the disbursal for the loan.

6. Do not use your credit card during the consolidation: The reason you have taken debt consolidation is because you want to get rid of debt trap. So, it makes no sense in making some more credit purchases and attracting new debt. You will only add more woes to your financial problems. You do not have to stop using your credit cards permanently. Do not close your credit card accounts, just stop using them till you come out of the financial crisis or after you will have paid off the consolidation loan.

7. Go for low rate credit cards: Take the low or a zero rate credit card with an introductory promotional period of one year, if you have a good credit rating. Use the option if you plan to pay the balance off within one year.

Daniel Cohen recommends Find Credit Cards for comparing different Morgan Stanley credit card applications.

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