Consolidating accounts is the process of combining two or more accounts into one. There are many reasons for consolidating your accounts. You could save time and money plus reap the benefits of convenience. It is easier to manage one account or creditor as opposed to many. If you have multiple credit accounts you may be able to reduce your monthly payments and lower your interest rate. You can consolidate your accounts using several methods including a balance transfer, home equity loan, or even a second mortgage. The method you choose will depend on the amount of debt you have.
Add up the balance on all accounts to be consolidated. Call each creditor or institution where you have an account to be consolidated. Ask for the payoff balance. This balance will include finance charges that have accrued up to the day the account will be paid off.
Consult with a credit counselor or other financial professional and choose the method you want to use to consolidate your debts. After you have selected a method let the financial institution know you want to consolidate your accounts. Provide the representative with the balance and account number of all accounts that will be consolidated. The creditor will mail payments to those creditors or send payments electronically.
Find out the terms and conditions. Discuss your new payment and interest rate. Calculate how much money you will save by comparing the old payment for all accounts versus the new payment for the new account when the consolidation process has been completed.
Make sure all of your accounts have been paid off. The financial institution of the accounts that were consolidated will send out final statements to show a zero balance.
Tips & Warnings
- If any of the consolidated accounts have negative balances call and ask for a credit balance refund. You may have to send money to those accounts which have a positive balance because the payoff was incorrect and that creditor did not receive enough money.
- Once your accounts are consolidated, make sure you don't use those credit cards again.
- Whenever you use a home equity loan, home equity line of credit or a second mortgage to consolidate accounts you are using your home as collateral. If you fail to make payments on time your home could be foreclosed upon.
- Photo Credit Jupiterimages/Photos.com/Getty Images