Other ways to pay off your credit cards
Personal loans aren’t the only way to tackle your credit card debt.
Debt avalanche
The debt avalanche method is a system of repaying the debt according to the amount of the balance. Rank your debts from lowest balance to highest. Then you pay as much as possible towards the smallest balance first while paying the minimums on your other debts.
Once you pay off the first debt, roll that payment over to the next debt on the list. You keep going this way, making the payments until you’re left with a large payment that reaches the last debt on your list.
0% APR balance transfer
A balance transfer involves using one credit card to pay off another. This may mean paying a balance transfer fee.
Balance transfers can save you money if your new card has a 0% APR . Keep in mind, however, that this APR is usually only valid for a set period of time. Once the introductory APR ends, the regular variable APR begins.
Home equity loan or line of credit
A home equity loan is a loan that allows you to take out equity using your home as collateral. A home equity line of credit (HELOC) works the same way, except you get a revolving line of credit instead of borrowing a lump sum.
Either could be used for debt consolidation. Keep in mind, however, that if you default on a mortgage or HELOC, you risk losing the property to foreclosure.
Negotiate your price
You could try negotiating a lower interest rate with your credit card company to save money. Whether your credit card company agrees to lower your rate may depend on your account history and card balance. But it’s worth calling to discuss how you can make your debt more manageable.
Consider a debt management plan (DMP)
If you’re struggling with credit card payments, a debt management plan could help. This type of plan, offered by credit counseling companies, allows you to make one payment on your debt each month. The credit counselor then distributes your payment among your creditors.
Debt management plans can save you money if your credit counselor is able to negotiate lower interest rates or fee waivers on your behalf. You can also get out of debt sooner if you commit to making payments into the plan as agreed.
When looking for credit counselors, be sure to look for a nonprofit that is affiliated with a national accrediting agency.
Explanation: Tip: When looking for credit counselors, be sure to look for a nonprofit that is affiliated with a national accrediting agency.
The bottom line
Using a personal loan to pay off credit cards could speed up debt repayment while reducing the amount you pay in interest. Whether debt consolidation makes sense for you may depend on your budget, spending habits, and the interest rates you’re likely to be approved for with a personal loan. In addition to personal loans, you can consider other options for managing credit card debt, including a balance transfer offer or debt management.
Frequently Asked Questions (FAQ)
How do I pay off credit card debt with no money down?
If you can’t find the money in your budget to pay off your credit card debt, you might consider meeting with a nonprofit credit counselor. A credit counseling company can review your debt, budget, and spending to help you find the money you need to pay off credit cards .
Should I pay off a credit card with another credit card?
Using a credit card to pay off other credit, e.g. balance transfer could save you money if your new card has a lower APR. The key to making this strategy work is to pay off the balance transfer before the APR promotional period ends.
How much can I borrow with a personal loan?
The amount you can borrow with a personal loan can depend on the lender as well as your credit score and financial situation. The average personal loan balance was $16,458 in 2020, although it is possible to find lenders that may offer personal loans of up to $100,000.
We strive to provide the latest valuable information to our readers accurately and fairly.