As of 2022, the average American had about $5,500 in credit card debt totaling a $925 billion credit card debt for the entire population. Credit cards may be convenient and easy to access, but they are slowly draining you financially through interest rate costs, especially if you have multiple credit cards from different banks.
Let’s discuss some clever debt solutions strategies you can employ this year.
What is credit card debt consolidation?
Credit card debt consolidation involves finding a source of funding to pay off your current credit card debt, preferably in exchange for lower interest rates. It is one of the most popular debt resolutions strategy employed presently. Here are a few ways you can consolidate your credit card debt.
Debt Consolidation Strategies
To avoid bankruptcy and simultaneously work on your poor credit score, here are a few tricks you can employ to consolidate your credit card debt.
Home equity loan or home equity line of credit
If you are currently paying off a mortgage, you may want to consider taking out a home equity loan, or a HELOC loan might be a great idea. The only difference between these two loans is when and how you receive the money. The home equity loan delivers all the cash at one go, while the HELOC loan gets money to the client at intervals letting them choose when they want each deposit and how much it should be. If you have a good credit score, you should be able to get a relatively low fixed interest rate.
It might sound like a bad idea to take out a loan against a retirement fund, but it may be necessary if you find yourself stuck between a financially hard place and a rock. Most 401(k) loans have a low-interest rate, which is great for credit card debt consolidation. The annual percentage rate is usually significantly lower than all your credit cards averaged, and you don’t have to put up an asset you are currently using as collateral.
Additionally, a 401(k) loan does not affect your credit score, but the debts you pay off will improve your credit score, making it a win-win situation. A word of caution: do not take out a 401(k) loan unless you are willing to hunker down and pay off every penny. If you are unaware of viable debt resolution strategies, seek debt resolution services to create a debt clearance strategy that works for you.
When it comes to credit card debt consolidation, you will find a personal loan to be one of the most favorable options. One of the advantages of taking out a personal loan is there is no introductory APR. You may also get low-interest rates depending on your credit score. Additionally, even with a bad credit score, you may still get interest rates that beat those you pay on your credit cards.
A debt management strategy
If taking a loan of any kind is not something you would like to pursue, you could approach a financial advisor for debt resolution services. These professionals can create a sort of map or financial plan that works well for your unique situation. You basically get a step-by-step guide on how to wiggle your way out of your financial predicament. A debt management professional may contact your credit card companies and negotiate a lower interest rate and a monthly payment plan. People with bad credit and an overwhelming amount of debt can benefit the most from this debt resolution approach. Without the help of these professionals, bankruptcy would be a real possibility.
The Take Away
These clever ways to consolidate credit card debt work best if you carefully consider your unique financial situation. Everyone’s finances operate uniquely and should be adjusted accordingly for the best results. Finally, use debt resolution services to speed up your financial recovery journey and achieve your financial goals faster.