Consolidating your credit card debt is a smart financial move for anyone in any financial situation. Credit card debt is among the worst types of debt thanks to the fact it is accompanied by such high interest rates. Even the best credit cards offered to consumers with the highest credit scores are in the double digits, which is significantly higher than most any other type of loan. The higher rates on credit card debt makes it more difficult for consumers to afford more than the minimum payment, more money goes toward interest than principal, and consumers pay significantly more than they spent just to carry a balance.
Debt consolidation helps anyone who finds themselves in a situation where credit card debt becomes a problem. You have options to consolidate your credit card debt into one payment. The best options are the ones that save the most money, and the ones that help you improve your credit. Before you learn how to consolidate your credit card debts into one payment, there are a few tips that will help you pay your debts off faster and more affordably once you do consolidate.
- Pay more than the minimum payment each time
- Apply any unexpected funds toward your debt until it’s paid off
- Create smaller goals within your goal of paying off all your debt to keep you motivated
Refinance Your Home
If you have a home with equity, you can either refinance or apply for a home equity line of credit. Both of these can be used to pay off all your credit card debt. You still have the debt, but it’s part of your home equity loan. You went from multiple interest rates in the double digits to one interest rate on one loan with a much lower single-digit interest rate. Your one payment is significantly less expensive than your many credit card minimum payments, and this means you can pay your loan off faster and for less than you could have before. The best advice is to take the money you were making toward all your minimum payments and continue to send the same amount every month to your new loan. It’s a much bigger payment than you owe, but it allows you to pay the loan off faster and for much less.
Debt Consolidation Loans
These are good options for anyone who has the credit to apply for a personal loan. With a personal loan, you have a longer period of time, a lower interest rate, and the ability to apply more toward principal than interest each month. A personal loan allows you to pay off each card and make only one payment each month. It’s more affordable, the interest rate is far less, and you’re going to pay much less over the life of the loan.
Balance Transfer Cards
Consumers with good enough credit to apply for a great credit card with 0% interest can apply for one that offers up to 21-months of no interest. If you can transfer all your balances to your new card, you’ve just given yourself more than a year to make large payments without paying any interest. This is a great way to take a huge chunk out of your credit card debt, if not pay it all off in that time frame. Paying no interest for a scheduled number of months means you’re able to pay only the debts you owe. It’s the cheapest way to pay off your credit card debt if you can do it.
Debt Consolidation Firms
If you don’t have good credit, you can work with a debt consolidation program. These programs take your credit card information and work with your credit card companies to settle your accounts. Once an agreement is reached, the consolidation settlement company informs you how much you owe each month, how much goes to each card, and how long it will take to pay off your debts. This should be a last resort, because many of these companies won’t help consumers unless they’re already late on their payments or missing credit card payments on a regular basis.
There are always options for those who want to consolidate their credit card debts, and some are much better than others. The best way to handle your credit card debt is to pay it off as quickly and as inexpensively as possible no matter how you choose to consolidate. Being debt free is a feeling so wonderful you won’t want to feel anything other than that the rest of your life.