Credit card debt can get out control very quickly if you get a handle on them
. Large debts can wreck household finances. Instead of spending money on things you need now, you are paying credit card bills for items that you forgot you bought years ago. Several late payments can tack on late payment fees which can turn into over the limit fees if you go over your limit. Here are some reasons to consider consolidating your debt.
Your Interest Is Too High
Interest rates can creep up if miss a few payments. What was once a 17% interest rate is now a 29% rate. Your minimum monthly payment is doing very little to make a dent into that big balance because most of that money is going towards interest. If you find your interest rates getting higher and only make minimum payments, you should try to consolidate.
Your Balances Are High
A balance near your credit limit can have a negative impact on your credit score. One part of the FICO equation considers your balance in relation to your limit. If you are near your max, you can bet your score is decreasing. If you cannot pay down your credit card balances to below 25% of you limit you may want to see if consolidation makes sense.
You're Paying Over the Limit Fees
This is a sure sign that you finances are out of control and you should try to consolidate your credit card bills. The fees are added on in addition to the high interest rate you are already paying. If you can only pay the minimum payment, it will take you more than a decade to get out of this financial mess. Debt consolidation services can negotiate with creditors to waive these over the limit fees and lower interest rates, making your minimum payment more effective.
If any of these scenarios describe your situation, you should look to consolidate your credit card debt. Ignoring the problem will only make your financial situation worse. By not paying down these balances, you'll always pay close to 20% interest on car loans and may never qualify for a mortgage.