Credit Card Debt
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5 Ways To Consolidate Credit Card Debt

One of the most problematic things for a credit card user is debt accumulation. You apply for enough cards because you want to take advantage of all their benefits. Do you wish to pay off your credit card debt ultimately? Yes? Consolidating debt might be your best pick!

Credit Card Debt

Knowing that they might help you increase your credit score or build a good credit history, you think that’s the right option. As a result, you end up with a long list of unused cards with high interests and unpaid balances.

Due to the fact that you won’t have to worry about splitting up your money into several payments and loan repayments, it might help stabilize your income and improve your financial stability.

In fact, managing credit card debt can be upscaled by using a top-rated card from the secured credit cards in Canada provider.

Is it A Good Idea to Consolidate Your Credit Card Debt?

Credit Card Debt

Debt management can be tiring and daunting for everyone. Especially when your earnings are limited and you don’t have enough to spare to deal with all the loan payments.

It can be even harder if interest charges accrue every month due to your failure to pay your expenses.

If you’re having trouble, consolidating your credit card debt can be one method to make things easier and reduce your multiple payments. However, you must consider several factors before deciding if consolidation is the correct move for you.

“Debt consolidation implies joining multiple credit balances into one to avoid multiple payments. Instead, you’ll now have to pay only one (maybe higher) payment!”

Debt consolidation may be the best option for you if you’re seeking any of the following advantages:

  1. Lower interest expense
  2. Manageable debt payments
  3. Decrease the payoff time

Consolidating credit card debt may make your payments simpler and more affordable as you work toward becoming debt-free. Let’s look into the benefits in detail before proceeding with our surefire debt consolidation ways.

1. It Might Lessen Your Interest Cost

If you own a credit card with a high-interest rate, debt consolidation may help you cut your cost to save more. This is because most of your income was used for the monthly payments, which can now be applied to the principal balance.

With a lower interest cost, you can manage to clear your debt quickly.

2. No Multiple Payments

Credit card debt, school loans, medical expenses, and other types of debt can all be merged into one monthly bill with a debt consolidation technique, resulting in a lower interest rate for borrowers.

Consolidation can help you plan and maintain your budget by allowing you to pay off all of your debts at once each month rather than having several payments due at various times.

3. It Might Boost Your Credit Score

You can raise your credit score over time by consistently making on-time payments and, eventually, repaying the debt. In fact, proper debt consolidation can help you lower your credit utilization and keep it below the 30% range.

Note: Your credit score can temporarily decline as a result of obtaining a new loan due to the hard credit check.

Ways to Consolidate Your Credit Card Debt

5 Ways To Consolidate Credit Card Debt

Debt consolidation has a lot of benefits, including quicker, easier repayment, and cheaper interest costs.

So, here are a few approaches you can consider:

1. Look For Good Personal Loans

Contacting your current bank or credit card provider and asking for a debt consolidation loan can be a good start. The application procedures are frequently conducted online or over the phone and are relatively simple to follow through as compared to other loans.

These loans are ideal since they frequently provide variable terms (usually 12 to 60 months) and establish a regular monthly payment due, which helps with budgeting.

In addition, certain financial companies will pay the debtors directly to save you from trouble.

  • However, you must be eligible for a personal loan according to the lender’s standards.
  • If you’ve already experienced financial troubles, you might not be qualified or only be eligible for an interest rate similar to your credit card rate.
  • In fact, to some people, personal loans sound too good to be true!

Yes, you might also have to pay an origination fee for the personal loan you want, but you can also find other options. However, after researching and asking, you can surely find lenders, banks, or credit unions that allow no-fee personal loans.

The key is to search your options first and don’t go straight into applying for the loan you qualify for.

Pros Cons
It offers fixed and affordable interest rates! It’s hard to meet the eligibility criteria if you have bad credit!
Usually, lenders offer unsecured personal loans (which require no collateral)! The monthly payment might be higher as compared to other loans!

2. Consider a Balance Transfer Credit Card

Yes, you can use a credit card to get rid of your credit card debts. Actually, there’s no rocket science in it. Instead, you apply for a balance transfer credit card and use this to combine the payments of all your credit cards.

They transfer your debt payments from other credit cards in full or in part to the new balance transfer card. And from that point on, you make recurring monthly repayments to this card.

  • In essence, it enables you to transfer funds between credit card accounts so that they appear on a separate card.
  • On balances you shift within a particular period, balance transfer cards frequently provide an introductory 0% APR.
  • You may completely avoid interest payable amounts on the transferred balance if you clear off the sums you transfer before the 0% introductory period ends.
  • You may receive up to 21 months of interest-free periods with a balance transfer card, which might help you save lots of pennies.
  • Furthermore, since you aren’t paying interest, plenty of your monthly income is allocated to the main sum, which makes it simpler to pay off your debt quickly.

Remember that transferring balances between cards provided by the same company may not be permitted. Additionally, it’s crucial to make on-time payments if you choose a balance transfer because missed payments could cancel the promotional APR deal.

Pros Cons
You can benefit from the 0% APR introductory period! The interest rates might shoot to the Sky once the introductory period ends!
It might have low-interest fees at the start (3-18 months)! There might be a balance transfer fee on every transaction you make!

3.  Find Debt Consolidation Programs

It’s critical to pay off your credit card debt immediately because your credit score may impact your future financial security. If only it were that simple, though. If you had that money and the necessary resources, you could have made all the payments, right?

But, obviously, we think that is the reason you are here.

A debt consolidation service plan is typically a service provided to customers whereby many credit card payments are consolidated into one. You typically send a single transaction to the company, which will subsequently distribute the money to your creditors.

  • Plans for managing debt are typically 3 to 5 years long and may have minimal up-front and continuing costs.
  • The monthly cost for your consolidation program should be less than making all of your repayments separately.
  • Additionally, it means that a larger portion of the payment will be used to reduce your current debt.
  • Although neither is guaranteed, debt consolidation services work with your debtors to lower loan interest rates and eliminate various costs, including late fees.

If your objective is to maintain your cards, make sure to confirm the requirements of any debt consolidation plan you are considering before enrolling.

Nonprofit credit counseling agencies, such as NFCC, can obtain your credit report and score without charge and go over the results with you if you need assistance with debt repayment issues that are negatively affecting your credit.

Note: Though the primary aim of each of these programs is to help you develop a payment strategy that works for you, some of them might have various setup or ongoing costs.

You should consider all this while choosing a debt consolidation plan and the company offering it.

Pros Cons
It usually offers lower interest fees! It might require you to pay monthly maintenance or other fees!
It works on creating a plan that suits your financial needs!  The debt management plan might be long, and you have to make monthly payments for a more extended period!

4. Ask Around the Family

This could be an option if your financial health is not sinking deep into the sea or if your debt status is not in a dangerous zone. First, however, you must ensure that you lay out the details to the person as you would to a professional debt handling official.

The best part is that you can acquire a loan from a friend or family member without having to meet minimum qualifying standards. In fact, you can get a much cheaper interest rate than what you would from a local bank or typical lenders.

Moreover, there won’t be any background checks to affect your score!

  • However, one downfall is that you might taint your relationship or friendship if you fail to pay the money back on time.
  • So, you have to think through every aspect before choosing this method.

You can think of this as a co-signer loan where the second party is held responsible for the unpaid finances after a set of time. Of course, this method has no legal aspect, but you never know if the person will decide to file a lawsuit or sue for the damages.

Pros Cons
You can get money instantly! Failed payments might ruin your relationship!
You don’t have to meet the qualifying criteria for the loan!  You might have to deal with lawsuits if the person decides to deal with things legally!

5. How About A 401 (K) Loan?

Of course, asking you to withdraw money from your retirement savings is the last thing we suggest. But unfortunately, dire situations demand immediate solutions.

However, if you believe getting rid of all that debt can help you get back on the right financial track, it doesn’t sound too bad, right?

It is possible to get a loan against your company-sponsored 401(k) at a rate lower than a private loan, and generally speaking, this move can improve your credit rating.

  • Since a credit check is not necessary to borrow money from your 401(k), it shouldn’t impact your credit score or call for a certain amount of credit.
  • The bills you pay off with the 401 (k) loan could eventually help raise your credit score.
  • Furthermore, there won’t be a credit inquiry due to 401(k) withdrawals.

And that makes it a good option as to why you should borrow money from a 401(k) loan. But, of course, we are not negating the risks involved. We only imply that a person got to do something to save himself from drowning in the sea of debt.

Pros Cons
It’s easier to take out money from 401(k) loans as you are technically borrowing from your account! Less or no investment or compound profits!
It doesn’t require a credit score check and won’t result in a hard inquiry; thus, no dip in your credit score! If you lose your job before completing the loan process, you will have to pay the money within 60 days!

Conclusion

Consolidating credit card debt can be smart to pay off debt and accrue less interest over time. But in order to succeed, you must examine the circumstances that led to your debt.

You have to find the primary root of your problem to avoid repeating the same thing!

Now that you know the helpful and easy-to-manage ways to consolidate your credit card debt, you can apply them to eliminate your small debts. If you’re stuck financially at any point in your life, you can always seek professional help on how you can efficiently and effectively consolidate your credit card debt.

If you enjoyed this article and found it helpful, do well to share it with friends and loved ones, and also, you can share your opinions in the comment section. 

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