8 Ways to Consolidate Credit Card Debt
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What Is Credit Card Consolidation?
How Does Credit Card Consolidation Work?
What Are the Benefits of Credit Card Consolidation?
8 Credit Card Debt Consolidation Strategies
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 may 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 with 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.
4. Home Equity Line of Credit (HELOC)
They offer flexible borrowing and repayment terms. Interest rates tend to be low compared with 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. The interest is paid back to yourself (minus fees potentially). 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. The money borrowed is taken out of the market and will not participate in any market gains, which will adversely affect the growth of the retirement funds.
6. Debt Management Plans (DMPs)
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. You may use the cash-out loan to pay down credit card debt. Your cash-out loan and vehicle depreciation may leave you with negative equity in the car. You risk losing your vehicle if you can’t pay back the loan. There can still be origination and closing fees.
Consider Strategies to Pay Off Your Credit Card Debt
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