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Reading: Ways to consolidate credit card debt
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Consolidating credit card debt could help simplify and lower your monthly payments as you work to become debt-free.
Consolidating credit batting order debt is when you combine multiple credit card balances into a single monthly payment that ideally has a lower interest rate than what you ’ re presently paying .
But consolidating your debt takes time, and many methods require an application procedure to see whether you ’ re approved first, which normally results in a heavily credit inquiry that can cause your credit rating scores to drop a few points .
To help you decide if credit card consolidation is correct for you, here are several methods to consider .
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Work with a nonprofit credit counseling organization
credit counseling organizations can review your stallion fiscal situation and function with you to create a plan to tackle your fiscal challenges. They give advice about citation issues, budget, money management and debt management .
If you work with a credit counselor, it ’ second important to research the organization before you get started. Check with your state lawyer general ’ sulfur function and consumer protective covering agency to ensure it ’ s reputable .
Pros: A citation counseling organization may work with your creditors to set up a debt-management design on your behalf, which requires you to make a single monthly payment to the citation counseling organization each calendar month. The arrangement then uses the money you provide to pay your creditors. Your credit counselor may besides work with your creditors to negotiate lower concern rates or waive sealed fees .
Cons: Some credit counselors may charge a tip for some of their services, and you may have to agree not to apply for new credit or use your existing credit if you participate in a debt-management design .
Apply for a personal loan
A personal loan can be used to consolidate debt, and the funds from a debt-consolidation loanword can be used to pay off your credit rating card balances. so alternatively of making multiple credit tease payments each calendar month, you make one payment for the personal lend .
Pros: If you have estimable credit, you may qualify for a lower sake rate on a personal loanword than the rates your credit calling card issuers are charging. personal loans offer flexible refund terms, so you can select the one that ’ s right for your budget. Plus, some lenders will send payment directly to your creditors, so you won ’ triiodothyronine be tempted to use the loanword funds for something else. And many lenders offer the option of applying for prequalification, so you can shop around to see what your likely options are without affecting your accredit scores .
Cons: You need to meet the lender ’ randomness eligibility requirements to qualify for a personal lend. If you ’ ve had fiscal difficulties in the past, you may not be eligible, or you may lone qualify for an concern rate that ’ s comparable to the current pace on your credit cards. In addition, some lenders charge an origin tip, which could add hundreds of dollars to the cost of your lend, which could eat into your lend funds before you even receive them .
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Use a balance transfer credit card
A counterweight transfer lets you move balances from one or more credit menu accounts to a different card. Balance transportation citation cards much offer an introductory 0 % APR on balances you transfer within a certain total of time.
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Pros: If you pay off the balances you transfer before the introductory period expires, you could avoid paying interest charges on the transfer balance raw .
Cons: The promotional period is limited. If you don ’ thyroxine pay off the come you transfer ( in wide and on time ) before the presentation period ends, the remaining balance will accrue interest at the circuit board ’ s regular rate .
In addition, some cards charge a poise transfer tip, which will add to the debt you must repay. besides, the sum you transfer — including any fees charged — can ’ triiodothyronine be higher than your recognition specify, which may not be high enough for you to pay off all your debt .
Keep in take care that you may not be allowed to transfer balances between cards issued by the same lender. And if you opt for a balance transfer, it ’ south specially authoritative to pay on time because late payments may cancel the introductory APR volunteer .
Ask a friend or family member for help
Depending on how much money you owe and what your overall fiscal photograph looks like, it may make sense to ask a supporter of family member to lend you the money .
But if you opt for this method acting, it ’ mho authoritative to be certain the lend terms and repayment plan are distinctly outlined, barely as they would be if you were getting a lend from a fiscal institution .
Pros: When you borrow money from person you know, you don ’ t have to meet minimal eligibility requirements to qualify for the lend, and you may be able to get a lower interest rate than you would from a bank or credit union .
Cons: Borrowing money from person you know is crafty because it can put a try on your relationship. besides, if you ’ re ineffective to repay the loanword on time, you might be putting their finances at risk .
Heads-up on the following options
The stick to are early credit menu consolidation methods that are available, but we don ’ thyroxine recommend them because they ’ re riskier than the options we ’ ve discussed above .
Cash-out auto refinance
Some lenders offer cash-out refinance car loans that allow you to use the fairness in your cable car to issue you a loan for other expenses, like consolidating citation calling card debt. But if you ’ re unable to make your payments, you risk losing your vehicle .
Home equity loan
Home equity loans let you borrow against your home ’ second equity and use the cash to pay for fair about anything. This may seem like a good choice because these loans much have lower rates than credit rating cards and personal loans. But if you default on payments, the lender typically has the right to start foreclosure proceedings, and you could lose your home .
Retirement account loan
If you participate in an employer-sponsored retirement report such as a 401 ( k ) or 403 ( boron ), it may be tempting to use some of those funds to pay off your debts. Retirement bill loans don ’ metric ton require a credit check vitamin a farseeing as your plan offers a lend option — some don ’ thyroxine — and matter to rates are typically lower than what you ’ five hundred pay at a bank or other lender. But if you ’ re unable to make your payments, the amount you withdrew could be taxed, and you might have to pay a penalty on top of that. Since the funds you borrow won ’ thyroxine gain pastime, you ’ re missing out on an opportunity to grow your retirement income .
Navigating credit card debt during COVID-19
If the fiscal affect of the coronavirus pandemic has you looking for ways to consolidate your recognition batting order debt, you ’ rhenium not alone. many people may find themselves with more debt right now or may be facing debt issues they ’ ve never encountered before .
If that describes your situation, you may have more than one option .
We ’ ve compiled some resources to help you find relief measures announced by the government, citation card issuers and more. If you can take advantage of these easing measures, they may help ease some of your fiscal burden, making your debt more accomplishable. Check out our summaries of those resources below .
Government relief measures
Relief measures from lenders and credit card issuers
General advice for paying down debt
If you ’ ra looking for general tips on how to budget or navigate your credit poster debt, we can help you with that besides. Check out some of our advice articles below .
What’s next?
Consolidating your credit poster debt into a unmarried requital may seem like the solution to your fiscal troubles, specially if you can get a lower rate.
Before consolidating your credit cards though, come up with a budget that will help you minimize your outgo while you ’ re paying down your debt. Once you have a plan, you can choose the credit card consolidation method acting that ’ s right for you. And try to avoid choosing a debt-consolidation method acting that may put your house, car or retirement in danger .
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About the author: Jennifer Brozic is a freelance financial services writer with a bachelor’s degree in journalism from the University of Maryland and a master’s degree in communication management from Towson University. She’s committed… Jennifer Brozic is a freelance fiscal services writer with a knight bachelor ’ s degree in journalism from the University of Maryland and a headmaster ’ s degree in communication management from Towson University. She ’ randomness committed… Read more.
