Consolidating your bills good idea

31 Jan

The National Foundation for Credit Counseling recommends that your housing not take up more than 30% of your take home pay and that your debts, including car payments, not represent more than 20% of it.

"A lot of times they will find its not as easy as simply having no finance charge.” As unwise as either option may be, neither is as easy as it used to be, says Cunningham --which may actually be a good thing.

These days, she says more people either have little or no equity in their home.

The problem there, she says, is that in many cases the new cards have hidden charges.

“People should look at the fine print on the new card they’re transferring to, to make sure they understand all the terms, says Lee-Driscoll.

Mistakes To Avoid If you want or need to consolidate, be aware of the following..

Don't use a home equity loans, says Roberta Lee-Driscoll, a certified financial planner in Honolulu; “if someone has five credit card debts and they consolidate it into a home equity line of credit that is a no-no.” That's because credit card debt is considered unsecured debt, meaning – there is no collateral to back it up.

With this option, you’d take out a single loan to replace multiple bills.

So, if you’re currently behind on 4 credit cards, you could combine them into one payment to reduce hassle and have a single interest rate. Let’s explore the potential advantages and disadvantages you would face.

Debt consolidation loans often come with a lower interest rate than the debt they replace.

So, if the average interest rate on your other debt is 20 percent, you may be able to slim it down to 15 percent, for example.

Within that, the average household with credit card debt owes nearly ,000, according to Credit