Hey all, I'm new to the forums and would like some help consolidating my credit card debt. Over the years I've racked up a hefty amount of debt (about 11,000) and was wondering if a personal line of credit to consolidate it all would be a good idea. I've received offers in the mail for the PLOC but am not sure if this would either benefit me or just be worse. I believe my FICO scores range from 690's-low 700's. Also, anyone know of any banks etc. that would offer a PLOC fairly easily? Or if a PLOC isn't the way to go, what's a CC that's easy to acquire with a good BT rate? btw, I've searched on the PLOC topic and didn't really come up with anything so any help would be much appreciated, thanks!!
First off - why do you want to consolidate debt? Are you looking for better interest rates or lower payments? If your scores are that high it sounds like you're not behind. I don't know much about PLOCs, but generally consolidating your debt into 1 payment only makes it easier to rack up more debt unless you are very disciplined and can move to an all-cash mentality. You might want to check out clark howard's website about PLOCs. If you are just interested in paying it all off as soon as possible, figure out how much extra you can afford to pay to those cards each month beyond the minimum payments, and apply that amount to the highest interest account. Once you pay that off, apply the extra to your next highest, and so on. It may take a few years ,but you won't be just moving debt from one place to another. Poochie
Yeah, I just wanna take advantage of better interest rates. I have a couple cards at 18-25% and it's killing me on finance charges each month. Basically, I was wondering if it would be a good idea to consolidate all my credit card bills into one bill at a lower interest (like 10%) or something. So you think paying a little more than the minimum each month (which I do) will do better than consolidating it all into one? Oh yeah, and what's the address to Clark Howard's website?
If you are looking for a better interest rate, a LOC can be a good choice. If you qualify for an interest rate that is lower than the rate on the accounts which will be consolidated, it is an instant money saver and convenient. Look out for annual fees (you should be able to find a feeless LOC). Keep in mind also that what is best for your financial well-being may not be the best for your credit score, and vice-versa. You should be aware that having any revolving balance exceeding 30% of your available CL may start to peck away at your score. What I personally would try first is calling your creditors and asking for a lower interest rate. Just tell them you got an offer for a BT at X%, and see if they can match it. With your credit score it shouldn't be a problem to see lower rates than 25 frickin percent. A resource that I have used is a book called Talk Your Way Out Of Credit Card Debt. You can read a bit about it at www.debtsmart.org. On top of this, I would use a debt elimination strategy like Poochie. However, the fastest way to pay off debt is not necessarily to pay extra on your highest rate card. While this saves the most in interest costs, it is not always the fastest way out. A strategy outlined in The ABCs Of Getting Out Of Debt can be quite a bit faster in terms of seeing results. List each debt on a piece of paper with its current balance, minimum payment, and months left to pay off (simply divide balance by minimum payment to find how many months left there are). Next, number the debts starting with the one with the least number of months left. Take all money applied over and above the minimum payments of all your accounts, and apply it to the first account until it is paid off. Now, take what you were paying on account #1 and apply that to account #2. This is sometimes referred to as a snowball effect. The idea is to use the exact same monthly outlay every month until all debt is paid. Many times, doing it in this order is faster than paying just the account with the highest interest rate, and nearly always shows faster results. If you can't get the creditors to lower the interest rate, or not lower it enough, using that LOC would be a great idea, as long as you don't mind the likely small shift in credit score for a time. Combine the LOC with the elimination strategy above for the best results.
Wow, thanks a lot Squeek and Poochie! I appreciate the valuable opinions from both of you. I think calling my creditors and asking to lower the APR is what I'll do first. If that doesn't work, I'll keep the PLOC in mind. Thanks guys!
Except that it's four years old and situations have changed. Getting a low-rate LOC right now is not easy. Getting any personal line of credit is not easy. As far as the method, you can see results in different ways. Paying all the extra on the highest interest rate will definitely get them paid off faster, because you're getting rid of the higher interest faster. But some people see results as having an account totally paid off. To see result paying off the higher-rate cards first, put everything in a spreadsheet. Sort by interest rate. Pay the minimum on everything except the highest-rate card. Put the rest of the money on that high-rate card. When it's paid off, you'll add what you were paying on that to the minimum on the next-highest card. That is now the highest rate, so it gets the extra money. Make sure you update everything each month. The rates could change, so it they do the card that is getting all the extra money may change. Whatever is the highest rate this month gets the extra money. So how do you see results? At the bottom of the spreadsheet, total the balances of all the cards. Then look at the total balance from last month. Subtract them, and you'll see how much your total balance has decreased. You'll be surprised at how much your balance will decrease.
