Are You Ready To Consolidate Credit Card Debt?
If you are struggling to make your credit card payments every month and wondering when and how you will ever pay down your credit cards, it may be time to consolidate credit card debt using a personal loan.
First, ask yourself these questions:
- Are you paying high interest on your credit card debt?
- Do you have a large credit card balance?
- Are carrying balances on multiple credit cards?
- Are you looking for alternatives to expensive cash advances from your credit card?
- Do you have medical expenses or large purchases that you would rather not put on a high interest credit card?
If you answered “Yes” to any of these questions, a personal loan might be a good option.
How Personal Loans Can Help Lower Your Debt
If you have been carrying credit card debt, or you need to finance medical expenses or other large purchases and don’t want to use high interest credit cards, a personal loan may be a good option. Personal loans often offer lower interest rates and better payment terms than credit cards do.
Today there are many types of personal loan lenders in the marketplace. Some cater to high credit borrowers. Others are low credit friendly. In addition, if you consolidate credit card debt with a personal loan, you may be able to obtain a personal loan with a lower monthly payment that can free up some cash for emergency savings, or a small investment fund to hedge your debts.
When To Consider A Personal Loan
If any of the scenarios below apply to your situation, consider looking into a personal loan.
- If the interest you’re paying in credit card debt is greater than the interest you can get on a personal loan. (Remember to look at all the associated expenses on the credit card and the loan – both interest and fees.)
- If you’re looking to consolidate multiple credit cards into one simple, lower monthly payment.
- If you’re looking to finance a large purchase or medical procedure at a lower interest rate.
Before Taking A Personal Loan, Do These Things
- Call your credit card company and ask for better terms. Sometimes you can negotiate a lower interest rate, smaller monthly payment, or fee waivers.
- Look into transferring high interest credit card balances to a 0% APR credit card. Many credit cards offer an introductory APR of 0%, up to the first 12-24 months. If you think you can pay down your credit card during the introductory period, this may be a good option for you.
- If you decide to take on a personal loan, research the lenders. Make sure there are no pre-payment penalties, fees, and no introductory rates that then go up,
- Compare offers from different lenders. Don’t go with the first offer you see. It’s now easy to compare across many lenders at once.
Check out our guide on how to get the best personal loan. We thoroughly review the best of the not-so-bad players in the personal loan space.
After you Consolidate Credit Card Debt
- Don’t use your cards! There is no sense in consolidating credit card debt only to run up your credit cards again. Put them in a safe place but don’t cancel them. Keeping your accounts open and paid off will increase your credit score.
- Go on a spending diet. Cut back on all the little things that add up at the end of the month. Turn it into a game. See how much you can save. Use our free app to help you stay on top of your game.
- Set up a budget. Figure out where your money is going. Designate different buckets for each spending category. When that category is depleted (e.g. movies), don’t spend beyond it.