Are you worried about the debt you have hanging over your neck? Maybe you lost your job and now find yourself in a situation where you cannot manage your credit card debt.
No matter the situation, debt can be tricky to deal with it. But don’t be troubled. If you have a huge credit card debt or multiple loans, you can reduce that burden. Here are five ways you can consolidate your debt and lower the interest rate without any stress.
Debt Management Program
If you want to reduce the interest rate on debt, the best way to go about it is through a debt management program. Financial counselors examine your financial status and provide advice on which debt-relief options are good for you. The best part is it’s for free. It is possible to get this relief through nonprofit credit counseling agencies. They also offer the possibility to pay the debt off within three to five years.
Pros
- The interest rate goes down to about 8%. This will reduce the monthly debt payment.
- All calls from debt cancellation agencies will stop when you enroll in this program.
- You can stop the program at any time.
Cons
- You’ll pay a monthly fee to manage the program, and all credit cards will be closed when you are under the program.
- Your credit card score will go down for the first six months. If you are consistent in repaying the loan, it will become steady and even stronger than before.
Balance Card Transfer
Another option is to move your credit card debt into a single card with a lower interest rate. It offers a 0% introductory rate. If you continue to pay off your debt before the initial period ends, you won’t get charge in any interest. This is called balance card transfer, and it might be the option you need in your present situation.
Pros
- Low-interest rate
- More money to repay the debt because you pay low interest for about 18 months.
- You will be left with one singular payment.
Cons
- The fees are likely to add up.
- Your interest rates might likely rise.
- This plan might hurt your credit score.
Personal Loan
Another smart way to clear your credit card debt is to go for a personal loan. The significant part about a personal loan is that you can repay it in equal installments. Your payment plans are predictable and consistent.
So, as long as you have enough income to cover your new payment, you’ll be fine. This plan is suitable for people with high credit scores to qualify for low-interest rates.
Pros
- One fixed payment.
- It has lower interest rates than credit cards.
- You will not risk your home if you fail to pay the debt.
Cons
- You have to pay lender’s fees, which might make the debt higher.
- The interest rates are higher with this plan.
- Long-term repayment plans will not be in your favor.
Peer-to-peer Loan
Another form of a personal loan is peer-to-peer lending. It allows individuals to connect with borrowers with no middlemen such as banks. This type of loan is generally done online that matches lenders with borrowers. This can also be risky because it offers unsecured and secured loans. So, it really depends on your credit score.
Pros
- If you have low credit, the transaction will be in your favor.
- The competition is very high here, so the interest can be lower than expected here.
- Your payments will be reported to credit bureaus, and it will help improve your credit score.
Cons
- A variety of fees that may jack up the interest may apply.
- You will have no input on how your grades are awarded.
- The process becomes tedious when several investors are bidding on the loan.
Credit Counseling
When the debt burden is getting too much for you, another way to solve the problem is to seek advice from certified professionals. They are trained experts who will help you to understand your financial situation. They advise you on how to reduce your debt and assemble a strategy to reduce your money troubles.
Pros
- The cost is low.
- The monthly payment will be reduced.
Cons
- May charge fees in the form of a monthly payment.
- The amount you owe will not go down.
Conclusion
We have gone through what you will need to bring down credit card debt in a way that will be convenient for you. It is up to you to choose the best that will suit your purpose. Make sure to select the one that gives you peace of mind. It’s important to consider which consolidation option you can afford to eliminate your credit card debt.
