If you have outstanding balances on multiple credit cards, you can use debt consolidation as a strategy to combine your balances into one payment. Doing this can make your monthly payments more manageable, reduce your interest costs, and shorten the payoff period. Wondering you can consolidate your credit card balances so your monthly payments become easier?
We tell you the most effective ways:
Balance Transfer Credit Card
This method helps you transfer your existing credit card debt to a new balance transfer card that does not charge interest for a certain promotional period (usually between 12 and 18 months). You will typically need to have an excellent credit score to qualify for a balance transfer card. Keep in mind that you’ll need to pay the regular interest rate for any debt that you haven’t been able to pay off during the interest-free period.
Home Equity Loan
If you own a home, you may be able to tap into the equity you have in your home and use it to pay off your credit card debts. The perks of home equity loans are that they have a lower interest in comparison to personal loans, the repayment period is usually longer, and you may not need to have stellar credit to qualify.
Personal Loan
You can also take an unsecured personal loan from a traditional bank, online bank, or credit union to consolidate your credit card debt. Typically, since personal loans have a lower rate of interest in comparison to credit cards and because they have a long but fixed repayment period, you may be able to pay off your debt a lot faster with a personal loan.
401(k) Loan
If you have a company-sponsored retirement account, you may be able to take a loan from it. This is, however, not advisable because you will bring down your retirement savings. However, if you can’t get a regular loan or a balance transfer credit card, you may want to consider this.
Debt Management Plan
If you are really struggling to clear your debts but can’t seem to qualify for any financial product because you have a low credit score, you could sign up for a debt management plan offered by a credit counseling agency.