Credit card debt consolidation, it is easy and simple. You want to make all of your credit card payments at once each month. However, you may have to borrow money to do so. After consolidating your credit card debt, you will be making a single payment and the interest rate will be low. However, you will have to get your loan approved before that. You may find this part a little complicated.
There are many options available to you for credit card debt consolidations. There are some advantages and disadvantages of each option. So, you should be able to opt for the right one. In this article, we will discuss the top 4 of these options. You will also learn about the pros and cons of these 4 ways.
4 ways you can consolidate credit card debt
There are some potential risks involved in debt consolidation programs offered by debt consolidation companies. Be aware of these potential risks. Now, which option can be best for you; it depends on the situation you are in. Here are the top 4 options for you:
Seek help from a nonprofit credit counseling organization
You can easily find a nonprofit credit card debt consolidation company helping people by offering valuable advice they need for creating plans to pay off their debts. However, make sure that the nonprofit organization is accredited by the National Foundation for Credit Counseling (NFCC).
- You can set up a debt consolidation program.
- A single payment will be made to the credit counseling company.
- It is the credit counseling company’s responsibility to make payments to each of your creditors.
- The credit counseling company can negotiate lower interest rates.
- You may have to pay a small set up fee.
- You will be paying a monthly service fee.
- Read the policies of the company carefully. Once everyone is paid off, some of these companies may ask you to close your credit cards. This might hurt your credit score.
Take a personal loan
You can find a bank, credit union or some online lender to take a personal loan. Your eligibility for the loan and interest rate depends on your credit.
- You could be paying low interest rate.
- You have enough time (several years) to pay off your debt.
- You might have to pay an origination fee.
- It is not easy to get a personal loan approved with a bad credit score. The interest rate will be high.
Make use of a balance transfer credit card
With a balance transfer credit card, you will be paying zero interest rate during the promotional period. You will reap this benefit not only when you transfer to the card but sometimes also when you are purchasing.
- You will pay zero interest during the promotional period.
- You will be charged a balance transfer fee.
- This may not accommodate all of our debts.
- Many lenders don’t allow balance transfer credit cards.
Withdraw or borrow from a qualified retirement account
You can also use the money you are putting away in your retirement account.
- No credit check is involved when you are borrowing or withdrawing money from your retirement account.
- You are using your retirement savings.
- You will have to pay income tax.
- In case you are younger than 59 ½, you will have to pay a withdrawal penalty.
- You can borrow up to 50% of the retirement savings and you will have to pay back the amount within the next five years unless you are using this amount to buy a house.
Apart from these three options, you can borrow against your home or vehicle, or you can borrow money from one of your friends or family members.