There are many ways to consolidate credit card debt

There are many ways to consolidate credit card debt

You can consolidate your credit card debt to reduce your monthly payments. This is a way to get debt-free.

Consolidating credit cards debt means that you combine multiple credit card accounts into one monthly payment. Ideally, the interest rate is lower than what you are currently paying.

Consolidating debt takes time. Most methods require that you apply to be approved. If not, your credit scores can drop.

These are just a few of the many options available to you in order to decide if consolidating your credit cards is right for you. Click to explore:

Get credit counseling from a non-profit organization

Credit counseling agencies will review your financial situation and create a plan with you to address your financial issues. They can offer advice on budgeting, credit management, and debt management.

It is crucial to thoroughly research any credit counselor before working with them. You can verify the reputation of the agency by contacting your state attorney General and/or consumer protection agency.

ProsCredit counseling agencies may help you set up a plan to manage your debts. You will need to pay one monthly payment each month to the credit counseling company. The organization will then pay your creditors with the money you have provided. A credit counselor can also help you negotiate lower interest rates, waive fees, and work with creditors.

ConsSome credit counselors charge fees for their services. If you sign up for a debt-management program, you might have to agree not use or apply for new credit.

Get a personal loan

A personal loan is a way to consolidate debt. However, the money from a debt consolidation loan can also help you pay your credit card bills. Instead of making multiple monthly payments on your credit cards, you pay one loan payment.

ProsYou may be eligible for a personal loan with a lower interest than what your credit card company charges. Personal loans allow you to choose the repayment term that works best for your finances. You won’t feel tempted to spend the loan money on something else because some lenders will pay your creditors directly. Prequalification is an option offered by many lenders. This allows you to shop around and see all of your options, without having to impact your credit scores.

ConsPersonal loans are only available to those who meet the requirements of the lender. In order to be eligible for a personal loan, you must meet the lender’s eligibility requirements. Some lenders also charge an origination fee. This can add hundreds of $ to your loan costs, and may even prevent you from receiving your funds.

Balance transfer credit card

You can transfer balances from one credit card account to another card with a balance transfer. Balance transfer credit card offer a 0% introductory APR on balances transferred within a set time.

ProsYou can avoid interest charges by paying off balances transferred before the introductory period runs out.

ConsThe promotional period is very limited. You will be charged interest at the regular rate if you fail to pay the balance transferred (in full and on-time) within the promotional period.

Additionally, you may have to pay a balance transfer charge on some cards. The amount that you transfer, including any fees, cannot exceed your credit limit. You may not have enough to pay all your debt.

It is possible that balances cannot be transferred between cards issued from the same lender. If you decide to transfer your balance, it is important that you pay promptly because late payments can cancel the introductory APR.

Ask a family member or friend for help

You may find it sensible to ask a close friend or family member to lend you the money.

If you decide to go with this option, however, you need to ensure that the loan terms are clear and the repayment plan is clearly defined.

ProsIf you borrow money from someone you trust, you won’t need to meet any minimum eligibility requirements. You may also be able to obtain a lower interest rates than you would get from a bank.

ConsBorrowing money to someone you are not close to is a risky move that can cause strain in your relationship. If you fail to repay the loan on schedule, it could put their finances in danger.

Check out the following options.

There are many other credit card consolidation options that you can choose from, but they are riskier than those we have already discussed.

Auto refinance with cash out

Lenders offer cash-out refinance car loans which allow you to borrow money to pay off your credit card debt or consolidate it. You could lose your vehicle if you can’t make your payments.

Home equity loan

Home equity loans allow you to borrow against your equity and use the money to pay almost anything. These loans have lower interest rates than personal loans or credit cards so this may seem like a good option. However, if you default on your payments, the lender may start foreclosure proceedings against you and you could lose you home.

Retirement account loan

You may find it tempting to use funds from your employer-sponsored retirement account, such as a 401k or 403b, to pay down debts. If your retirement plan has a loan option, you don’t need to have a credit check. In addition, the interest rates on retirement account loans are generally lower than what you would pay at banks or other lenders. However, if you can’t make your payments, the withdrawal amount could be taxed and you might have a penalty. The funds you borrow won’t earn interest so you can’t grow your retirement income.

Navigating credit card debt during COVID-19

The financial impact of the coronavirus epidemic may have you searching for ways to consolidate credit card debt. Many people are likely to have increased debt or new debt problems.

This could be your case.

We have compiled resources to assist you in finding relief measures that are offered by credit card issuers, government agencies, and other organizations. You may be able to take advantage of these relief options, which could help you reduce your financial burden and make your debt easier to manage. You can find our summaries below.

Rosemary S. Bishop