People avail various kinds of loans. Credit card loans are one of them. At times people avail many loans to fulfill their different needs including education, family support, business, etc. However, it becomes a hectic task to separately pay back all those loans when it comes to repayment. For instance, if somebody has taken 5-6 loans, it would be difficult for him/her to pay them back separately. That is where consolidating the credit card debt comes into play. Consolidate the credit card debt lets you pay the combined amount of all the loans in a single repayment. In addition to that, it is also possible to get the interest rates lowered with the help of credit card loans consolidation. Consolidate is not only offered in credit cards but also student loans and sometimes even government loans.
However, it is not as smooth as it sounds. Sometimes you will have to apply for long applications to meet the loan consolidation requirements. It becomes nearly impossible to consolidate loans for the person unfamiliar with the relevant information.
Therefore, to make the consolidate of credit card debt easier and more smooth, we have given the best ways by which you can get your credit card loans consolidated. To become completely familiar with the process, you need to go through all the ways that we have mentioned in this article.
Though there are many methods of consolidating debt, here are some of the best ways to consolidate credit card debt:
Join hands with a non-profit monetary counseling company
Pros: The counselors can get the loan consolidation plan by negotiating with the creditors on your behalf. They may also be able to get you a lower interest rate as well as get fees waived off. As they are experienced professionals, the chances of getting a good plan are relatively high
Cons: Depending upon the policy of the company, you may be charged fees for the counseling. In addition, the terms of the negotiated consolidation plan may not be suitable for you, yet you will have to agree to them as they have been negotiated on your behalf.
Monetary or credit counseling companies are a great tool for consumers to provide them with guidance related to money management, budget management, debt repayment planning, and so on. These organizations are adept at analyzing your financial situation and providing the right counsel.
Often, people become nervous whenever they see complex financial data, interest rates, and conditions. Not everyone is an expert in finance and crediting. It is crucial to understand the dynamics of loan repayments and consolidation to make the right decision. This is where these companies come in with their expertise, making them the right choice for those who get confused when they see terms like ‘APR’ or ‘debt refinancing’. However, the pros and cons must also be considered.
Get a balance transfer card
Pros: The initial 0% or a very low rate significantly reduces the interest payments which means that the payments done in this period contribute to the principal only. You can also use this reduced rate to pay off all amounts within the initial time to avoid future interest payments
Cons: If you don’t pay back in time or do not pay back in full within the reduced rate period, the interest rates will rise quickly, resulting in increased interest payments. The balance transfer fee is usually charged on the balance you have on your cards. Having a large balance can cause high fees.
A balance transfer allows you to transfer all the amounts due in one or more credit cards to a new card. Companies will often offer a 0% interest rate for a limited duration as an incentive for people to use the transfer card option, for which a fee is often charged. As in a typical loan consolidation, this option will allow you to pay back single amounts per month. Though the introductory rate may make this consolidation option attractive, you should be aware of possible costs as well.
Use personal loans
Pros: If you have a good credit score, you can get a personal loan at lower interest rates. Such loans have adjustable repayment terms. This means less interest will be charged on monthly payments.
Cons: Lenders often charge a fee for this loan. The rates for these loans also tend to be higher than secured loans, for instance, a home loan. Moreover, such lenders have tough requirements to be qualified for loans. If you don’t have a good credit score or had some financial issues in the past, you may not be qualified.
A personal loan is essentially an unsecured loan taken from a bank, credit union, or other lenders. Unsecured means that there is no security or collateral to be given. This loan also provides the benefit of consolidation of multiple payments into one set monthly payment.
Try reaching out to family
Pros: A family member will likely ask for a lower interest rate. Upon failing to repay within a deadline, you can negotiate with your relative without any risk of any collateral. These loans also mean that you don’t have to meet stringent criteria that other loan consolidation options tend to have.
Cons: Failure to pay in full or on time can damage your relationship with the relative. It will also affect their financial situation. This option is usually possible when the amount you need is not a lot and even then, the chances are not certain as your family members can have their financial issues as well.
If the amount you owe is not huge, a family member can likely help you out. Although it is not a documented or legal contract, it is still a good and viable option. You can get lower rates than the typical options. However, you must decide the loan conditions and repayment terms before taking it.
Avail retirement loans
Pros: The loan will most likely have an interest rate lower than other consolidation plans. The payments are made directly by subtracting from your salary.
Cons: You will miss out on the investment opportunity in your retirement account. Failure to pay in time results in hefty penalties.
Many retirement plans or 401(k)s offer a loan option. If you have such an account and it allows the loan option, then you take 50% of the account amount or USD 50,000 as a loan, whichever is less. These loans are easier to get as there is no thorough past credit check. The only requirement is that your retirement plan has a loan option. You should get this loan if you are certain of your job security.
Home equity loans (or HELOC)
Pros: The interest rates on these loans are lower than personal loans. Home equity loans are also easier to get as the only requirement is that you have equity in the house.
Cons: If you fail to pay back the payments, you will lose ownership of your house.
As the name suggests, a home equity loan is a loan taken against your home. Since you are putting your house as collateral, the interest rates are lower. A Home Equity Loan is a single amount one gets whereas a home equity line of credit (HELOC) provides you with an option of drawing multiple times during a period, during which you have to make payments as well.
Credit card payments can easily mount up causing a financial crunch. Credit card consolidation loans are an excellent way to tidy up your finances. However, everyone faces a different situation and so there is no single best option. Do your research on all options and avail the one most suitable to you.