Lots of credit card debt? Why consolidation might be right for you

(InvestigateTV) — Debt consolidation can be a powerful tool to help simplify your finances – combining multiple debts into a single payment, often at a lower interest rate.

Cherry Dale, the vice president of financial education at Virginia Credit Union, said debtors should create a plan, because debt consolidation only works if people are not going to open up new lines of credit and take on more debt.

She said unsecured debt is the best place to start.

“So, things like credit card debt,” she said. “Number one, if you have other types of debt, like buy now, pay later debt, it’s becoming much more common. That unsecured debt is something you want to look at. It’s probably got the highest interest rate attached to it.”

Dale suggested making a list of your debts – the balances, monthly payments, and interest rates – before deciding whether to include secured loans, like a car loan with a fixed interest rate.

She also said to be wary of teaser rates that can go up, as well as hefty transfer or consolidation fees.

“So, you want to understand what you’re signing up for,” Dale cautioned. “We see a lot of zero percent credit card offers and there’s nothing wrong with that, but you’ve got to understand after the six months to the year, what interest rate does it default to and where are you at the end of that? And just making sure you have a plan around paying that off is really important.”

If you’re considering consolidation, Dale said, check your credit reports to be sure all debts are accounted for.

Free reports from all three credit bureaus are available at annualcreditreport.com.