How to Effectively Consolidate Credit Card Debt

Consolidating credit card debt involves combining the balances from different credit cards to a single monthly payment. The new debt has lower interest costs and more extended periods of repayment.  Consolidating your credit cards will save you from multiple bills and due dates, especially when you are straining financially. You can do it without the help of debt consolidation companies. Choose an option that will not put you into more financial problems.

The most suitable method to consolidate your credit card debt depends on factors like:

  • Your credit score
  • Your credit history
  • The amount of debt you have

Some of the options to consolidate your credit card debt:

Personal Loans

Apply for a personal loan. If the loan is approved and disbursed, use the cash to clear your credit card balances. You will shift your focus from paying multiple credit card balances, to repaying a single loan. To qualify for a personal loan, you should credit score must be high. Personal loans have flexible terms, which enable you to get one that suits you. Your loan creditor may also send the money directly to your credit card companies.  You will not get the temptations to use the money for other purposes.

Balance Transfer Credit Cards

Balance transfer credit cards need you to apply for another credit card, then transferring your old card balances to it. You will get a promotional period with the new card. You will not pay interest during the promotional period, which lasts for 12-18 months. For you to qualify for a balance transfer credit card, you need to have a high credit score.

Debt Management Plan

A debt management plan is ideal for people with bad credit. Credit counseling agencies offer debt management plan services. They also negotiate with your credit card companies for lower interest rates and more extended repayment periods. You sign for the plan and start making payments to the agency each month. The agency will then pay the credit card companies.

Still, your credit cards will be frozen. You will not be able to apply for new cards. To avoid bad debts in the future, they will also offer you with financial counseling.

Borrow From Yourself

If you have a retirement account sponsored by your employer, you may use some of the funds to clear your credit card debts, only if your retirement plan offers a loan option. The loan does not affect your credit score. The interest rates are often low. However, the loan can have an impact on your retirement income if it is not repaid.

Home Equity Loan

If you are a homeowner, a home equity loan enables you to apply for a loan, with your home as collateral. You use the loan to pay for your credit card balances. Home equity loans usually have low-interest rates.

If you are having difficulty making and managing your payments, consolidating your credit cards will be a good option. Select a method that is appropriate for you to avoid going into bad debt again. In the long run, credit card consolidation will be beneficial if you quit your poor spending habits. Most importantly, weigh all your options before making a decision.
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