You’re looking for a way to simplify or reduce your monthly credit card payments, and consolidation seems to do the trick.
Determining the optimal method for YOU depends on factors such as your level of debt, your financial situation, and your credit history. Let’s explore your options.
To figure out the best way to consolidate your credit card debt, let’s start here. Credit counseling agencies assess your finances and cuddle up with you to make a plan to get you in better shape. You also get advice on debt and money management, budgeting, and credit issues.
The organization will likely work with your credit card issuers to establish a debt management plan that requires you to make a single monthly payment to the organization. The organization will then allocate these funds to your creditors. You can also ask your advisor to try to get lower interest rates or get some fees waived.
You may have to pay the company a small monthly service fee, and some programs prohibit you from applying for new credit or using existing credit while you’re enrolled.
Get a personal loan
For credit card debt consolidation, consider applying for a personal loan. This financial strategy can simplify paying your bills, since you only have to worry about one monthly payment. No more juggling and keeping track of multiple invoices of varying amounts and due dates.
Good credit may entitle you to a lower interest rate than what you are paying now. In fact, getting a better rate is the only way the strategy makes sense. Some lenders will pay your card issuers themselves to eliminate the risk of you losing money and making things worse. For the same reason, you should only look for a loan that is large enough to cover the debts you want to consolidate.
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With some lenders, especially the online ones, you can pre-qualify, which means you can get a feel for what you qualify for without a serious credit check, which affects your credit rating. Keep in mind, however, that you may have to pay origination fees, which could offset some of the savings you will achieve through consolidation.
Credit card balance transfer
This strategy allows you to consolidate high interest credit card debt by transferring your balances to a card that offers, during a promotional period, a low APR or the gold standard: 0% interest. If you clean up your balances before the promotional period ends, you can save a lot of money on interest.
The condition is that you must be able to repay your debts before the end of the introductory period and before interest rates rise again. In addition, you may have to pay a balance transfer fee, which contributes to your debt load. Also be aware that the amount you transfer cannot exceed your credit limit, which may not be high enough. In addition, you may also be prohibited from transferring balances between cards that have the same issuer.
Home equity loan
This strategy allows you to borrow against the equity in your home and use the proceeds to consolidate and pay off your debts. This may seem like a great option, as these loans usually come with relatively low interest rates, lower than personal loans and credit cards. However, this method is cumbersome because default on payment means the lender can repossess your home, which you have put as collateral.
So what’s the best way to consolidate debt? As we discussed, it depends. The important thing is that you have options. Take a close look at your financial situation and make the right choice for you.