The sooner you can get rid of your debt, the better.
- New data reveals that large numbers of Americans owe sizable credit card balances.
- There are steps you can take to consolidate your credit card debt and make it more affordable to pay.
Credit cards are a convenient financial tool, one that 88% of working Americans like to use, according to Salary Finance’s fourth annual report. But of those, about a third consistently carry over a balance from one month to the next. And among those who do, 41% have a balance of more than $3,000.
However, the problem of carrying a balance is twofold. First, the longer you owe money on your credit cards, the more interest you’ll accrue. That is effectively the same as throwing money away.
Also, too much credit card debt could hurt your credit score. And once that number drops, lending could get harder.
If you owe a fairly large sum on your credit cards, it’s important to pay it off as soon as possible. Here are some options that can make your debt more affordable, thus setting the stage for a faster payment.
1. Make a balance transfer
A balance transfer allows you to move your existing credit card balances to a single card. Why is that advantageous? Many balance transfer cards come with a 0% introductory interest rate. And if you get a break from accumulating interest on your debt, it can make it easier to get out of the hole you’re in.
Of course, those introductory periods don’t last forever. But if you can get a 12- or 15-month deferral of interest accrual, it could make a big difference.
2. Take out a personal loan
With a personal loan, you borrow a lump sum of money that you can use for any purpose. If you take out a personal loan, you can use your earnings to pay off your credit cards, leaving you with just that loan balance to tackle.
Why is it useful? Personal loans typically charge less interest than credit cards. If you can drastically reduce the interest rate on your debt, it becomes less expensive and easier to pay.
3. Take advantage of the equity in your home
If you own a home that you have equity in, you can borrow against it to pay off your credit cards. First, you might consider getting a home equity loan and apply the same approach you would apply to a personal loan. Home equity loan interest rates are generally much lower than credit card interest rates.
Another option is to do a cash-out refinance, in which you get a new mortgage with a higher balance than you currently owe on your home. The excess money you borrow can be used to pay off your debt. And as you may have guessed, you’ll typically pay a much lower interest rate on a new mortgage than on credit cards.
Credit card debt can hurt you financially and affect your mental health. If you’re stuck in a cycle of credit card debt, it’s imperative that you do everything you can to get out of it as soon as possible. And any of these options could be his ticket to getting rid of that debt sooner.
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