7 Best Ways To Consolidate Credit Card Debt

As you work towards having zero debt, credit card debt consolidation can help reduce your monthly payments which can save you money every month. There are a lot of ways to consolidate your debt. Figure out the approach that favours you, based on the amount of debt you want to pay off, the present state of your finances and the strength of your credit records. In this article, we discuss the best way to consolidate credit card debt.

Credit card debt consolidation involves the combination of many credit card balances into one monthly payment that has a relatively reduced interest rate compared to the one you are presently paying.

However, it takes time to consolidate your debt, and the application process to confirm your eligibility is required by most methods. As a result of this, your credit score may drop a few points. If you want to know if credit card consolidation is the appropriate step for you to take, below are some of the best ways to consolidate credit card debt:

1. Home equity loan
2. Working with a nonprofit credit counselling organization
3. Using a balance transfer credit card
4. Cash-out auto refinance
5. Applying for a personal loan
6. Retirement account loan
7. Seeking help from friends and family

Best Way To Consolidate Credit Card Debt

1. Home equity loan

This involves borrowing against your home’s equity and paying for almost anything with the cash gotten from it. This option is recommended on this list because home equity loans usually tend to have reduced rates than personal and credit card loans. However, the consequence of defaulting on payment is that the lender literally has the power to initiate foreclosure proceedings, and your home could be taken away from you.

2. Work with a non-profit counselling organization

One good thing about credit counselling organizations is that they give financial advice about debt management, budgeting, credit issues and money management. They can help evaluate your whole financial condition and work with you to draft a strategy that will counter your financial troubles. Before working with a credit counsellor, it is necessary that you research and confirm that the organization is a reputable one.

One positive effect of a credit counselling organization is that they can liaise with your creditors to create a debt management plan for you, which will require you to make payment to the credit counselling organization once a month, every month. With the money you provide, the organization can pay your creditors. In addition, reduced interest rates or specific waived fees may be negotiated with your creditors by your credit counsellor.

However, there are equally certain conditions associated with hiring a credit counselling organization. For instance, you may have to pay for some of the credit counsellors’ services, and you would probably have to agree not to take up any new credit or use your current credit if you’re working with a debt management strategy. Indeed, this is one of the best ways to consolidate credit card debt.

3. Using a balance transfer credit

Here, you can move balances from one or more credit card accounts to another card. Usually, balance transfer credit cards give an introductory 0% APR on balances you transfer within a specific time frame.

An advantage of this method is that you could avoid paying interest charges on the entire transferred balance if you pay off the balances you transferred prior to the expiration of the introductory offer.

The disadvantage of this method is that the introductory offer is limited, and if you do not completely pay off the transferred amount on time before the promotional period closes, the rest of the balance will accumulate interest at the card’s normal rate.

Furthermore, balance transfer fees charged by some cards will increase the debt you have to pay back. Moreover, your transferred amount can not be greater than your credit limit, and this may make you unable to pay off all your debt. In all, it is noteworthy that you endeavour to pay on time as delayed payments can nullify the introductory APR offer.

4. Cash out auto refinance

In some cases, some lenders give cash-out auto refinance loans that enable you to use the equity in your car to provide a loan for you for other expenditures such as credit card debt consolidation. However, you stand the risk of losing your car if you do not payback.

5. Applying For Personal Loan

Do you know that a personal loan is one of the best ways to consolidate credit card debt? Well, you can use the funds from a debt consolidation loan to pay off your credit card debts. Thus, you only make a single payment for the personal loan instead of making multiple credit card payments every month.

The advantage of this plan is that there are chances you may qualify for a reduced interest rate on a personal loan if you have good credit, compared to the interest rates charged by your credit card providers. In addition, repayment terms for personal loans are quite flexible, so you can pick which best favours you.

6. Retirement account loan

For retirement account loans, they don’t require a credit check so far as your plan provides a loan option. The interest rates are usually lower than what banks and other lenders charge. However, if you do not pay back, the withdrawn amount may be taxed and you might even have to pay a fine also. Regardless, this option is a great opportunity to increase your retirement money since the borrowed funds do not accrue interest. This plan is definitely one of the best ways to consolidate credit card debt.

7. Seeking help from friends and family

It is not a bad idea to consider asking a trusted friend or a member of your family for help in paying off your credit card debts. If you actually do consider this method, make sure the terms of repayment are conspicuously stated, as though you are borrowing from a financial institution.

The benefit of this method is that you don’t have to meet any certain requirements or eligibility conditions before you get the loan. Plus, you may be able to negotiate a much lower interest than you would if you were engaging with a bank or any other financial institution.