Consolidating Credit Card Debt: 3 Ways to Go About It
Are you drowning in credit card debt? It’s easy to get overwhelmed swiping that plastic, which is why a lot of people face huge credit card debts. This type of debt can compromise the credit score that can prevent you from taking out a loan. Aside from that, it can tarnish your financial record. If you’re struggling to pay your credit card debt, one effective way to address it is to consolidate it.
Credit card debt consolidation puts together all your credit card balances into one, turning them into one monthly payment. Doing so will help reduce interest costs, make payments more manageable, and in some cases, it can shorten the period of repayment.
Here are ways you can consolidate credit card debt:
Credit Card Consolidation Loan
A considerable advantage of this type of loan is its fixed interest rate. It’s ideal for individuals who need a fixed loan repayment amount every month. Even more, if you have a good credit score, you can benefit from a low Annual Percentage Rate (APR).
Credit unions may grant you an unsecured personal loan to get more flexible loan terms and lower rates. That makes them a better choice if you’re exploring this loan option to consolidate your credit card debt compared to online lenders.
Bank lenders also provide reasonable APRs if you have good credit. If you get from an online lender, you will need to pre-qualify first to preview your rate, loan amount, and term.
On the other hand, if you have bad credit, it will be challenging to get a low rate for this and some loans come with an origination fee.
Balance Transfer Card
Also known as credit card refinancing, this type of loan transfers credit card debt to a balance transfer credit card that charges no interest for a specific period—typically between 12 and 18 months.
What makes a balance transfer card attractive to individuals who want to consolidate their credit card debt is the 0% introductory APR period. However, this requires a high credit score to be eligible.
Line of Credit or Home Equity Loan
If you own a house, this type of credit card consolidation loan will work for you. You can use the equity in your house to pay off your credit card debt.
Your home’s equity is a lump-sum loan with a fixed interest rate. On the other hand, a line of credit is like a credit card with a variable interest rate. Since the house secures the loan, it’s possible to get a lower rate than a balance transfer credit card or personal loan. The thing is, there’s also the possibility of losing the home if you fail to pay.
Fortunately, there are many ways to consolidate credit card debt. You can get a home equity loan, a balance transfer credit card, or a credit card consolidation loan. Whichever you choose, consolidating your credit card debt is an excellent option to help you pay them off easily. All you need to do is find the one that will suit your needs and your current financial state.
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