Discover the 5 Best Ways to Consolidate Credit Card Debt
Last updated 12/17/2019 byAllison Martin
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Why and How Can Credit Card Debt Be Damaging?
What Is Credit Card Debt Consolidation?
- You are able to pay off your credit cards but need a better and faster way to do it
- You can get a lower interest rate by consolidating your credit card debt
- The terms of your debt consolidation show that you can pay off your debt in a reasonable amount of time
Should you consolidate credit card debt?
- The interest you qualify currently qualify for is lower than what you’re currently paying.
- You would rather pay a single creditor each month than several. This can also be beneficial in protecting your credit source since one late payment from oversight can tank your credit score.
- You can afford the minimum payment on all your cards but are looking for a quicker way to eliminate the balances.
- You’re not disciplined with your spending.
- Your credit score is poor and you only qualify for astronomical interest rates.
- Money’s tight and the new payments still won’t be affordable.
Here are 5 Credit card debt consolidation options to consider
1. Debt consolidation loan or line of credit
- Lower interest rate
- Rate shopping permissible by some lenders (with no impact to your credit score
- Lack of discipline could lead to even more credit card debt
2. Balance transfer credit cards
- Merges several payments into one
- Extended promotional APR period can save you hundreds, if not thousands, in interest
- High credit barriers to entry
- You could end up spending a fortune in interest if the balance is not paid in full before the promotional period expires
- Balance transfer fee applies (usually between 3% and 5%)
- Could tempt you to incur more credit card debt
3. Home equity lines of credit (HELOC)
- Lower interest rate
- Interest paid on the loan is tax-deductible
- Extended loan term
- Poor credit scores aren’t a problem with some lenders
- You could lose your home if you default on the loan
- Extended loan term means more paid in interest over time
4. 401(k) Loans
- No credit check
- Easy access to fast cash
- Loans become premature distributions if not paid in full
- Tapping into your nest egg can negatively affect future earning potential
5. No credit check installment loans
- Good credit not required
- Exorbitant interest rates
- High monthly payments
How To Know When It’s Time to Get Your Credit Card Debt Under Control
- Your credit limits are maxed out. Experts agree that charges amounting to more than 70% of your available credit limit may be a warning sign that you need credit card help.
- You find yourself using your credit card to pay for items you used to pay for with cash. This can be a sign that you are living beyond your means and relying too heavily on credit cards.
- You’re only able to pay the minimum payment each month.
- You shift credit card balances from one card to another to avoid over-the-limit spending.
- Payments are late or missed.
- You feel embarrassed about your credit card balances.
Allison Martin is an accomplished finance writer who has written for publications including The Wall Street Journal, MoneyTalksNews, The Simple Dollar, and Credit.com. Her work has been featured on Fox Business, Yahoo! Finance, MSN Money, and ABC News. She enjoys writing about personal development, entrepreneurship, personal finance and is a Certified Financial Education Instructor (CFEI).
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