When you have credit card debt, it can feel like you’re drowning in monthly payments. The truth of the matter is you aren’t alone. There are millions of other people who also deal with credit card debt. According to a GOBankingRates survey, 30% of Americans carry between $1,001 and $5,000 in credit card debt. That same survey reported that 15% of people surveyed have $5,001 or more in credit card debt. While about 6% of those people have over $10,000 in credit card debt. Finding a way to consolidate credit card debt can make you debt-free.
You’re in the right place if you are looking for the best ways to consolidate credit card debt. Here’s what you need to know about consolidating credit card debt.
When looking at options to consolidate credit card debt, one tool that can help is an unsecured personal loan. You can use a bank, credit union, or an online lender that can provide money for you to consolidate your debt.There are a few benefits of doing it this way. Depending on the lender you choose, they can automatically make the payments directly to the credit card companies, so you don’t have to. Another reason a personal loan can be a good option is that, ideally, you will have a lower APR on your debt.Keep in mind that the lender you choose for a personal loan can also make a difference in your interest rates. For example, credit unions are considered not-for-profit lenders.
This means they can provide more flexible loan terms for their members. This could work to your advantage if you are a borrower with fair or bad credit (689 or lower on the FICO scale).
The reason is that federal credit unions can only charge a maximum APR of 18%. Instead of using a personal loan from a credit union, you might decide to go with a bank. Banks could work well for those who have good credit. Especially if you are an existing customer. Choosing to get a personal loan from a bank can also give you access to more significant loan amounts. On top of that, discounted rates may be available too.You can try an online leader if you don’t want to use a credit union or a bank for a personal loan. With an online lender, you can check to see if you pre-qualify without it affecting your credit score.
The great thing about pre-qualifying for a personal loan is it can give you information about the loan amount, possible payment amounts, and interest rates.
Another great option is to do a balance transfer as you consider consolidating credit card debt. Also known as credit card refinancing, balance transfers move debt from one credit card to another. If you have a credit card with a high-interest payment, this strategy could help you save money. Most balance transfers offer a promotion period where they don’t charge any interest on the balance. This time frame is often between 12 and 18 months. For example, moving debt to a credit card with an introductory APR of 0% could help you pay off the balance interest-free.You can qualify for most balance transfer cards if you are a borrower with good or excellent credit (690 or higher on the FICO scale). You want to do your research before making a final decision on the balance transfer card. Some cards can charge a one-time balance transfer fee from as low as 3% to 5% of the total amount being transferred.
It’s a good idea to calculate whether the interest you can save over time will clear the cost of the fee.
Another one of the best ways to consolidate credit card debt is by getting a home equity line of credit. Homeowners can benefit from this debt consolidation option because you can use the equity in your home to pay off high-interest credit cards. You can also consider using a home equity loan. It can provide a lump sum of money with a fixed interest rate compared to a line of credit with variable interest rates. Usually, in the first ten years, a HELOC requires interest-only payments. Which is known as the draw period. This means you must make more than the minimum payment to reduce the principal and pay down debt. With the loan being secured by your house, it’s a high chance you will get a lower interest rate than a personal loan or balance transfer credit card.
It is equally important to note that you could lose your home if you don’t keep up with the payments.
One last way to consolidate your credit card debt is to use a debt management plan. The great thing about this option is that it rolls all your debt into one monthly payment at a lowered interest rate. If you struggle to pay off your credit card debt but have bad credit, this option may work best for you. Also, a debt management plan doesn’t affect your credit score since you are not borrowing money or opening a new line of credit.
When you consolidate credit card debt, you give yourself more financial breathing room. Debt can stop you from doing the things you enjoy, like taking a vacation or buying an item you want. You should know that it is possible to eliminate your credit card debt and become debt free. You just have to take things one step at a time. If you do a balance transfer, get a personal loan, or use a HELOC, learning more about these options can help your financial future. If you are ready to start on your path to consolidating credit card debt choose a company that cares about your financial future. Need fast cash?
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