Debt happens, and sometimes it gets out of hand. High-interest credit card debts can come from all kinds of things, whether for education or getting a new car or house. The thing is, credit cards often have high interest rates. And the monthly bills? They are pretty difficult to manage for real. If credit card debts seem inevitable to you, you should plan how to make them more manageable.
One popular strategy used by many is debt consolidation. Basically, this financial technique refers to rolling out several debts, typically high-interest ones, into one single payment. If done right, you can end up paying one debt with a lower interest rate while still improving your credit standing. If you want to consider consolidating your high-interest debts, here are several ways for you to do so.
- Create a debt management plan
Debt management programs are beneficial for consolidating credit card debts without a loan. Offered by credit counseling organizations, this option is particularly helpful for reducing your debt’s interest rates and monthly payment, as well as minimize penalties. Basically, this is beneficial for regaining control of your finances while minimizing unsecured debts.
For this option, you will directly pay your monthlies to the credit counseling organization. Your monthly payment will be determined by your household income and expenses. In general, a debt management plan can help you create a more realistic monthly budget and stay more punctual and organize with payments and bills.
- Go for a balance transfer credit card
Another popular way to consolidate your credit card debts is through a balance transfer card, which lets you move several account balances to a different card. This also allows you to have a card without interest fees for a promotional period of 12-18 months. To qualify for balance transfer credit cards, you need to have an outstanding credit standing of at least 690. On a positive note, issuers of these credit cards do not charge an annual fee and only charge about 3% to 5% for a balance transfer fee.
With that in mind, find a card with interest that could wipe out those fees over time. Moreover, if you want to avoid paying for the transferred balance’s interest charges, you need to pay off the balances before the introductory period ends. The remaining balance will earn interest at a regular rate if you fail to repay the amount you transfer before the introductory period expires. There are also creative options like Billvacy as well.Â
- Refinance your mortgage
You can also consolidate or even pay off your debt by refinancing your mortgage. We highly suggest that you first talk to a credible home loan expert. They can give you into choosing a new loan and if it suits your existing debt or financial situation.
This might require you to pay for some closing costs such as origination and underwriting fees, as well as extra ones like an attorney review fee, application fee, and appraisal fee. Properly account for the total closing costs. If it’s too high, then you might want to consider going for an unsecured personal loan instead.
Nonetheless, it’s important to remember that there are tons of factors to consider when refinancing your current home loan for debt consolidation purposes. If you want to benefit from this option, you need to get the right equity and marketing conditions. Other amazing benefits of refinancing include lower monthly payments, better mortgage rates, and lower interest rates.
- Borrow money from someone you know
Last on the list is asking a family member or friend. However, you might want to consider your overall financial situation and the amount of money you owe. Just like when you’re borrowing from a financial institution, have an agreement regarding the repayment plan and loan terms.
Borrowing money for a person you know gives you the benefit of getting a lower interest rate than a credit union or bank. You don’t even need to meet any eligibility requirements to borrow money. This option requires you to be more careful in repaying your loan, as it can strain the relationship.
It’s crucial to consult an experienced credit counselor to give you proper advice. Such professionals can help create a plan for managing your debts and guide you moving forward. Be careful in making further financial decisions to avoid worsening your debt situation.
