When you are drowning in huge credit card debts, you have to consider a debt repayment option to get out of it.
However, choosing an option that suits your affordability is advisable.
If you can make the minimum payments towards all your debts but you can’t manage the outstanding balances on multiple credit cards, then you can go for debt consolidation.
Consolidating the credit card debts can be the best option. Because the interest rates will be reduced and your late charges may also get waived off. Your multiple debts are combined together and you’ve to make a single monthly payment. . You have to make a fixed single monthly payment to the new loan instead of paying multiple creditors.
You can seek professional debt relief service to get out of your credit card debts through the debt consolidation program. But, you can consolidate credit card debts on your own as well.
By consolidating the credit card debts on your own you can avoid service fee that a professional debt relief company charges.
How can you close the doors of credit card debt on your own?
Here you go:
1. Go for credit card balance transfer
You can pay off your multiple credit card debts by transferring the balance in another credit card.
Shop around for a low-interest rate card so that you can transfer your entire high-interest balance into the low-interest rate card.
This is a DIY method of getting out of the credit card debt. Transfer your entire balance into the new card within the introductory period. By doing so, you can qualify for the teaser rates and transfer the money at a low rate.
While taking out the new card, make sure you read the fine prints. Make sure you don’t miss any important information that can backfire you in the long run.
2. Borrow from your life insurance policy
You can also borrow against your life insurance policy to pay off all your credit card debts. The insurance company will not require you to pay back the loan as long as the loan is not more than the value of the policy. However, it is best that you make payments towards the loan as soon as you can. In case you are not able to pay back the loan, then the money that your beneficiaries are to get after your death is used to cover the remaining loan amount.
3. Take out a home equity loan
If you ask me about the safest debt consolidation loan, then I will suggest you to take out a personal loan.
A home equity loan can be your best option if you are cash-strapped but house-rich. You should repay the home equity loan within the time. You should make timely payments on the secured loan so that you don’t risk losing your home to a forced foreclosure. However, if you think you can’t make the timely payments, you shouldn’t go for this debt consolidation option. So, before taking out a home equity loan, asses your income properly.
4. Take out a loan from your family members or friends
If possible, get a personal loan with no or less interest rate from your family members or friends.
It can be a good option to pay off all your credit card debts, because you can repay the loan at your favorable time.
If you don’t get personal loans from friends or relatives, you can apply for a personal loan from a credit union or a bank.
Remember, you have to pay a fixed amount and you have to pay this during a fixed period of time. In case you have a bad credit score, you may not get approved for this loan. Even if you get approval you may be charged a very high-interest rate.
5. Take out a debt consolidation loan
Take out a consolidation loan with an affordable interest rate and a repayment term. You can approach any bank or a trustworthy financial institution for the loan. Pay off your outstanding credit card bills with the loan. By repaying your debts with a debt consolidation loan, you can save money on interest. Make sure you make regular monthly payments on your new loan (Consolidation loan). Try to repay the debt within the stipulated time.
6. You can borrow from your retirement fund
You can even take out a loan against your retirement fund to repay your credit card debts. However, make sure your 401 (k) or IRA account allows you to take out a loan from it. You can use this money to pay off all your debts and then pay only towards this loan.
However, it is better to try other options before opting for taking out a loan from your retirement fund, because the money is for securing your retirement.
If you have multiple high interest rate credit card debts, then go for this one.
Remember, you will need to repay the loan within 5 years or else you will be subject to penalty.
7. Negotiate with your creditors
You can also request your creditors to reduce the interest on your credit cards. Explain your financial hardship to your creditors to convince them for a better repayment term or rate. If your past credit card bill payment records are good, the creditors may waive late fees or can offer you a better repayment option.
Are you receiving threatening calls from the debt collection agencies? If yes, then your accounts have been turned down to the collection agency.
Remember, your debt may have become a constant source of worry for you. Under these circumstances, you have to understand that getting out of debt is important. When you default on your credit card payments, most likely that the creditor will hand over your accounts to the debt collectors. But have you tried to help yourself? If no, then try to get out of it as soon as possible.