Juggling debt from different accounts with different payment amounts and due dates can be challenging. It may feel like chipping away at an iceberg.
Credit card consolidation offers a great way to simplify your monthly credit card payments while helping you save. There are many ways to consolidate credit card debt, and determining the best method is a crucial process towards discovering freedom from debt.
Here are some of the best credit card consolidation options.
Balance Transfer Credit Card
This option requires a balance transfer card with a high credit limit to accommodate your combined credit card debts. The card should also have a low annual percentage rate APR for the process to be worthwhile. A balance card transfer is a brilliant way to consolidate debt before the introductory rate expires, leading to a new debt amount.
Home Equity Loan Or Home Equity Line Of Credit (HELOC)
A homeowner with good credit and enough equity can borrow some of it to consolidate their debts at an affordable rate. Home equity refers to the difference between the value of your home and the amount you owe on your mortgage. A home equity borrower can use these funds to pay off high-interest debts such as credit cards. Options of borrowing from home equity include:
- Home equity loans: This option allows you to borrow a lump sum at a fixed rate.
- Home equity line of credit: HELOC gives you access to a credit line to draw from at a variable rate.
Debt Consolidation Loan
If you are looking for a low-interest rate on consolidated debt, then a debt consolidation loan is one of the best credit card consolidation options at freedomdebtrelief.com and similar sites. A debt consolidation loan involves taking out a large loan to pay off all the smaller debts leaving you with only one monthly payment. The larger loan typically charges lower interest rates than credit cards hence easier to pay off. However, the lender needs to first qualify that you are capable of paying off the large loan. There are two types:
- Secured loan: These loans need collateral such as your stocks, bonds, car, or house. In the event you default on monthly payments, the lender can take the asset. They offer low-interest rates and extended repayment periods.
- Unsecured Loan: This type of loan doesn’t require any collateral but rather creditworthiness and a dependable income source. They have a fixed interest rate and require monthly payments.
Debt Management Plan
If you are opposed to a debt consolidation method that involves applying for a balance transfer credit card or taking out a loan, a debt management plan would be perfect for you. A debt management plan involves working with a non-profit counseling agency that negotiates with your creditors and comes up with a payoff plan. You then close all credit card accounts and make only one monthly payment to the non-profit agency. Your creditors, however, will keep billing you statements so that you can keep track of how much of your debt is being paid off. A great non-profit agency should be affiliated with the Financial Counseling Association of America (FCAA) or the National Foundation for Credit Counseling (NFCC).
Peer To Peer Loans
Peer to peer lending utilizes an online platform to match potential borrowers to lenders without the involvement of an official financial institution. A potential borrower fills out an online application, and the platform reviews their credit rating and risk involved. The applicant is then given an appropriate interest rate, and they receive available options from investors. The borrower then evaluates the suggested options and chooses. The investor lends the borrower money, and the borrower is in turn responsible for a monthly interest payment and the principal amount upon maturity.
In conclusion, it is important to ensure the lender you opt for is legitimate. Ensure they are registered in the state where they run their business. If in doubt, contact the attorney general’s office or lender’s website for further verification.