Struggling with credit card debt is one of the most irritating things a person can experience. The pressure of debt is unimaginable, and with banks involved, you are in great crises.
In this article, we will be looking at what is meant by consolidated credit card debt and how to consolidate credit card debt on your own. This article has the top five most convenient ways to consolidate credit card debt with the knowledge of the best way for consolidation. You can decide easily on which method you should opt for.
What is Consolidate Credit Card Debt?
Consolidating credit card debt is a process in which you combine the debt on multiple credit cards with varying balances in one and take a loan for paying it off at an interest rate that saves your money overall. One usually combines the balances and transfers them into a low-interest credit card that helps in saving a lot of extra money.
Ways to Consolidate Credit Card Debt
Let’s find out the five most frequently used ways to consolidate credit card debt:
Balance Transfer Card
If you think that there is no way for credit card debt relief, let me clear this to you. You can pay off your credit card debt and reduce the interest rate if you play smartly and consider all possible options.
A balance transfer card is one of the most suitable and customer-friendly ways to consolidate credit card debt. No matter how big your debt amount is, you can transfer it to your balance transfer card, which charges 0% APR, ranging from 6 to 18 months.
You will most likely be paying a transfer fee between 3% and 5% when you transfer the credit card debts; therefore, you need to choose the balance transfer card wisely that guarantees you money-saving.
While using this type of consolidation method, make sure to pay off the debt as quickly as possible before the APR percentage starts; otherwise, that will cost you more.
One of the most traditional and used ways to consolidate credit card loans is by taking a personal loan from a bank, credit union, or online lenders.
Getting a personal loan is very simple, and it offers a consistent payment method with flexible terms, usually from 12 to 60 months. You can get a loan on a low APR and at a fixed interest rate means you will be saving your money in paying off your debt.
A lender will look into your credit score, income, total assets, and total debts in deciding the loan amount. Therefore if you have a bad credit score, you might end up facing difficulty in getting a loan.
401(K) loans are taken from the retirement savings and therefore reduces your money for the future. This way of consolidating credit card debt should be your last option, as our primary goal is to bear maximum loss while paying off our credit card loan.
You do not need to have a credit score to qualify for a 401 (K) loan and can get the loan at a lower interest rate, which is exactly what you want.
401 (K) loans are usually due in the next five years, and if you lose a job, you need to pay back the loan in a lesser time. You will be exposed to high fees and penalties if you fail to pay back your retirement savings; therefore, always consider this way as your last option.
Credit Counseling Agency
There are credit counseling agencies that strive to make your debt management easier and more manageable. In this way, if consolidating credit card debt, your credit cards are combined into a single monthly payment.
You will make that single payment, and then the lenders will transfer the money to your creditors. The debt consolidation programs are known to work with creditors to reduce the interest rate that helps save money while paying off the debts.
Whether you have a high or low credit score, you will be eligible to get a debt consolidation loan by credit counseling agencies at relatively more convenient monthly payments. Also, avail half interest rate than the one you need to expense while paying off credit card debt.
Cash-out Auto Refinance
Do you know your vehicle can help you consolidate your credit card debt? In cash-out auto refinance, you can place your vehicle as collateral and, in return, get a loan to pay off your credit card debt.
One can get cash-out auto to refinance a loan at a comparatively lower interest rate, but the downside is that the loan amount will be subjected to the value of your car. This means that the higher the value of your vehicle is, the more loan you can get for your credit card debt.
Another drawback of this way of consolidating credit card debt is that you might end up losing your vehicle if you fail to pay off your debt. Also, you need to bear the expenses to insure your vehicle, which will increase your monthly expenses; it doesn’t sound appealing, right?
Best Way to Consolidate Credit Card Debt
Choosing the right way to consolidate your credit card debt can be one of the most challenging tasks you have ever faced. Therefore, proper research is required before finalizing the way, as you shouldn’t regret your decision.
The article has tried to guide you with a different way to consolidate credit card debt in the easiest way possible. I hope you have decided the ideal way to suit your credit score, income, assets, and debts, which guarantees you to save money.
Always remember, there is no point in consolidating credit card debt if you are not saving money while paying off debt. In my research and study, I have found out that using a credit counseling agency is the most reliable, economical, and less risky method that will save your money and help you manage your debts more effectively.
Matthew is a Co-Founder at BusinessFinanceArticles.org. Matthew was a floor manager at a local restaurant in Wales. He lost his job after the pandemic and took initiative to make a team and start the project.