Should I consildate my loans and how do you do it?

Question

I am only 24, but just paying a lot of bills (on time, mind you). But car, braces, 2 credit cars...is there a good way to turn this into just one payment? Any thoughts?

Answer 1

Bankrate.com
Saving when you're barely surviving
Monday August 28, 6:00 am ET
Don Taylor
Dear Dr. Don,
I am a husband and father of two young toddlers. My net pay is just enough to scrape by every two weeks. With health insurance premiums well over $400 per month, my net pay is only enough to cover the bills. Every time I set aside money, I end up having to use it all for some unforeseen expenditure, and then some with credit cards (whose balances continue to escalate). Where does one in my situation begin to save?
-- Underfunded Mike

Dear Mike,
Your question is one of the more difficult issues in personal finance. How do you work toward the future when you're having trouble getting through the week?
The key is to keep spending less than income. Easier said than done, but that doesn't mean it doesn't need to be done. Spiraling credit card balances aren't the answer. Credit cards just postpone the problem and have you spending money on finance charges that should be going toward meeting your family's needs.
Differentiate between what's necessary and what's nice in your monthly spending. Cutting out cell phones (or alternatively land lines), cable TV, dinners out, etc. brings down your monthly nut. Bankrate has a budget work sheet that you can download to put together a monthly spending plan. Talk to your employer's personnel department to see if there are ways of reducing the health-care costs while keeping family coverage. Taking advantage of flexible spending accounts to pay for medical costs with pretax dollars is one possible way of accomplishing this goal.
The other side of the equation is to increase income. Take a second job, or a third. Don't think of it as forever, just until you can get the credit card balances down and build a bit of a cash cushion. If your wife doesn't work, perhaps she should. Bankrate's "Should my spouse work, too?" calculator will help with that math.
The answers aren't easy, but you've got to ramp up income, throttle back on spending or both to get to the point where you move past paycheck-to-paycheck living and get to the point where your income is also building toward your family's future.
If you've worked through all this and still can't see a way, it's time to ask for help. Your state government might be able to help with health-care insurance for the children, for example. A Bankrate feature, "Finding help in hard times," has some other ideas, too.
To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "financing a home," "saving & investing" or "money."

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Answer 2

I Wouldn't Do It. Being As Your Only Twenty Four The Interest Rates On Your Car Loan And Credit Cards Is Probably Over 15% So If You Consolidate Alll Your Debt You'll Probably Get A Loan With An Interest Rate Of More Than 15%. So You Would Be Paying Interest On Interest Which Is Fine If Money Is No Concern To You....Just Take Twenty Minutes(If That And Pay Your 4 Or So Bills)You Can't Be That Busy......

Answer 3

I agree with the first person. When you consolidate you end up freeing up your credit cards and most people end up charging them back up again.

What you should do is call your two credit card companies and ask for a lower interest rate. On top of that keep your eye out for credit card offers giving low interest rates for transfers. We got a Chase card that offered 0% for one year and 5.99% thereafter. Depending on what you owe on your car you might be able to refinance at a lower rate, or again do a credit transfer.

Whatever you do, you will need to practice discipline with regards to your credit cards so that you don't just toss something on a card unless you will pay off that charge before the next billing cycle.

While a great credit score will help you get that lower interest rate, you shouldn't let creditors screw you. Our car loan for a 2005 car was 5.99% and we got an 18.99% credit card lowered to 5.99% just by calling and asking for a lower rate. Sears told me they didn't negotiate and I told them I don't do business with those who refuse to negotiate; the Sears card was transferred to a 0% card and I closed that account (you shouldn't close 0 balance cards as it COULD lower your score.)

Answer 4

It is hard to borrow ourselves out of debt!
You can consolidate, but in time you could end up using your cards again. Try to pay off the highest interest rate first, and don't borrow!