8 Credit Card Consolidation Strategies
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What Is Credit Card Consolidation?
How Does Credit Card Consolidation Work?
Pros and Cons of Credit Card Consolidation
Credit Card Consolidation Strategies: 8 Ways to Consolidate Credit Card Debt
1. Balance Transfer Credit Cards
Balance transfer credit cards are easy to apply for. You’ll find numerous offers available. Interest-free financing is offered, though for a limited time. Offers are usually reserved for those with good and excellent credit. You won’t know your credit limit until after you’ve been approved. A balance transfer fee of 3% to 5% will apply.
2. Credit Card Consolidation Loans
Payments can be made directly to lenders. Fixed rates and payment amounts offer predictability. Lower APRs may be available. There can be origination and other fees. These loans may not be available to those with bad credit. The application process is longer compared to balance transfer credit cards.
3. Home Equity Loan
They offer lower interest rates than personal loans. These loans can have a long repayment period, keeping payments low. There are generally less stringent credit requirements. You must own property with significant equity. There can be origination and closing fees. You risk losing your home if you default.
They offer flexible borrowing and repayment terms. Interest rates tend to be low compared to unsecured loans. There are less stringent credit requirements to qualify. You must have home equity. There are typically significant origination and closing fees. Interest-only payment options can make it easy to avoid paying down debt.
5. 401(k) Loan
No credit check is required. There’s no effect on your credit. Interest rates are low. You’re putting your retirement savings at risk. You’ll face high fees if you fail to repay the loan. If you change jobs, you may have to pay back the loan more quickly.
6. Debt Management Plans
You make one payment each month. Your interest rates and fees can be reduced. You’re assisted by an experienced counselor. You may be asked to stop using credit cards. The terms of the plan can be derailed if you miss a single payment. There will be enrollment fees and monthly fees.
7. Friend and Family Loan
You’ll have potentially no fees or even interest charges. No credit checks are needed. There is no formal application process. You can risk your relationship with family and friends. You can be putting others at financial risk if you fail to repay the loan. It can be difficult to ask for help.
8. Cash-Out Auto Refinancing
You may get a low interest rate. There are generally fewer fees than other secured loans, such as those against your home equity. There’s little effect on your credit since you’re just replacing one installment loan with another. Since vehicles tend to depreciate, you may not have much equity. You risk losing your vehicle if you can’t pay back the loan. There can still be origination and closing fees.
Tips on Keeping Your Credit Card Debt From Ballooning
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