A credit card is an essential tool in society. It helps you make purchases and, when used well, can help build a great credit score. However, sometimes, life throws you a curveball, and you find yourself with multiple credit card debts. One of the effective ways to pay the balance is by consolidating the debts. That means you get a new loan, pay all the debts, and now you only handle one debt.
Before You Consolidate Credit Card Debt
Before considering debt consolidation, note your end goal. Do you aim to lower your interest rates, or are you hoping to cut your monthly expenses? Maybe your goal is to get rid of the debt faster. Talk to a Symple Lending expert, who can help you decide whether this is the right move for you. With that said, some of the ways to consolidate your credit card debt have been discussed below.
Apply for a Personal Loan
You can take out a personal loan and use the funds to repay the different credit card balances. As Symple Lending explains, rather than making several monthly credit card payments, you’re now making one payment, which is your personal loan. This method is very effective if you have a good credit score because you’ll get a loan at a lower interest rate. Also, personal loans tend to have flexible repayment terms, allowing you to select a method that suits you.
Look Into Debt Consolidation Programs
Such programs combine your credit card debts into one. From there, you only make one payment which is forwarded to your different creditors. This is not the same as a debt consolidation loan because credit card debts still exist. The difference is that another party is handling the payments, making it easier for you to manage your debt. With such programs, you pay less every month than what you would have paid if you were handling the debts on your own.
Another way to get funds to consolidate your credit card debt is through peer-to-peer lending. Such platforms bring together people who want to invest and those seeking loans. The idea is for both parties to get something out of the situation. As the borrower, you get a loan to repay credit card debt, ending up with one monthly payment. On the other hand, the investor gets a return on their investment through interest.
Borrow From Your 401(k)
Withdrawing money from your retirement savings isn’t a good idea unless it’s an emergency. Actually, this shouldn’t be your first option when you’re trying to consolidate your credit card debts. That said, it comes with a few advantages. For starters, there’s no credit check when taking a loan from your 401(k). Also, the interest rate is low, and this strategy can boost your credit profile. Just understand that this route reduces your retirement funds.
And there you have it, some of the ways to consolidate your credit card debt. Look into your financial situation before determining which method is ideal. Better yet, talk to a financial advisor about your situation.
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