A Twelve-Point Debt Consolidation Check-Up

There are many aspects of financial health, such as your use of credit cards, your mortgage, and your retirement savings. As with any health issue, it is better to do regular check-ups than wait until there is a problem, and perhaps nowhere is this truer than with credit card debt.

People often turn to debt consolidation and credit counseling when their credit card debt has gotten out of control and payments are already behind. At this point though, access to debt consolidation loans is limited by credit problems. To avoid reaching this point, anyone who uses credit cards could benefit from doing the following twelve-point check-up at least.

The Twelve-Point Check-Up

• Do you have unused credit card accounts open? You might want to close these up--too many can drag down your credit score and increase your exposure to identity theft.
• How many different credit cards do you use regularly? Make a list, and leave room to fill in the answers to the next three questions.
• Which cards have a balance that you've been carrying forward month-to-month? Add the current balances to your list.
• What is the interest rate on those cards? Note this alongside those balances.
• Are these monthly balances growing? If so, credit card debt consolidation may be indicated, since credit card debt can be very expensive.
• What other loans outstanding do you have?
• What are the interest rates on those loans? The answer to this and question 10 will tell you whether you have an opportunity to go beyond credit card debt consolidation, and save money on your mortgage, auto loans, or other debt as well.
• What is the total of all your monthly loan and credit card payments? If you haven't been paying your credit card balances down, then the total of what you've been paying on average is effectively what your budget can afford.
• What access do you have to debt consolidation loans? If you have equity in your home, you can use a mortgage to get a lower rate than on other forms of debt consolidation loans.
• What would be the current interest rate on that type of debt consolidation loan? Shop for rates on the type of debt consolidation loan indicated by the answer to question nine.
• What would be your monthly payment on such a loan? Loan calculators can help you compute this.
• How does this compare with your current monthly payments? Keep in mind that lower payments do not necessarily represent actual savings if you are stretching debt over a longer time period, but this may be necessary to get control of your debt. Also, do not use a mortgage as a debt consolidation loan unless you are completely confident these payments will fit your monthly budget.

Debt Consolidation and Credit Counseling Services

If you can work through this check-up on your own and take the indicated steps, you should be on the road to better financial health. Remember though, if you find the process confusing or don't know how to proceed, there are debt consolidation and credit counseling services available that can help. This checklist might simply assist you with identifying problems: after that, seeking timely help may be the best step forward.

About the Author:
Richard Barrington has been a businessman and writer for a quarter century. Shortly after graduating Magna Cum Laude from St. John Fisher College in 1983, Richard joined Manning & Napier Advisors, Inc., a Registered Investment Advisor. Starting in an entry-level operations position, he worked his way up to become head of marketing and client service, an owner of the firm, and a member of its governing Executive Committee. His efforts contributed to the firms growth from slightly over $1 billion in assets under management when he joined, to over $12 billion in 2006. While at Manning & Napier, Richard earned the Chartered Financial Analyst (CFA) designation from the Association of Investment Management and Research (now the CFA Institute").

In August, 2006, Richard retired from the investment business to pursue a writing career. He has worked primarily as a freelance writer on a variety of business topics, while also writing manuscripts for three books.