If you’re struggling with credit card debt, you’re not alone. The majority of U.S. consumers who use credit cards don’t pay off their balance in full every month, according to a recent survey by First Tech Federal Credit Union.
But there are steps you can take to make your existing debt easier to manage. And consolidation is one option that might not only save you time but money.
A good 38% of consumers have considered consolidating debt, as per the aforementioned survey. And if it’s an option you’re interested in, here are a few ways to go about it.
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1. Apply for a balance transfer
If you’re juggling multiple credit card balances, you might qualify for a balance transfer offer. What might then happen is that you get to move your various balances onto a single card with a 0% introductory APR. Getting a reprieve from accruing interest might help you get ahead of your debt.
This could be a decent option to explore, but you must be aware of the potential pitfalls. For one thing, your 0% introductory rate will only remain in effect for so long. Often, those intro periods run out after 12 to 18 months, after which the interest rate on your debt could skyrocket. Also, there can be fees for moving a balance over, so read the fine print before moving forward.
2. Take out a personal loan
A personal loan lets you borrow money for any purpose. You can take out a personal loan and use your proceeds to pay off your various credit cards. Then, you’ll only make a single loan payment every month until you’re debt-free.
With a personal loan, you won’t qualify for a 0% introductory interest period like you might with a balance transfer. But the upside is that you may be able to lock in a lower interest rate on your debt with a personal loan compared to what you’re paying now.
Plus, personal loans offer the benefit of fixed interest rates. So you won’t have to worry about your debt payments rising over time, and you get to know when your final payment will be.
3. Sign up for a home equity loan
If you own a home you have equity in, you might qualify to borrow against it in the form of a home equity loan. These loans work similarly to personal loans and offer a number of the same benefits. You’ll get a fixed interest rate on your debt that results in predictable monthly payments, and your interest rate will likely be lower than what your credit cards are charging you.
The only thing to keep in mind is that if you fall behind on a home equity loan, you risk not just damage to your credit score, but also, losing your home. Serious consequences can ensue when you fail to make payments under a personal loan, too. But falling behind won’t necessarily mean putting yourself at risk of losing the roof over your head.
Consolidating debt often makes a lot of sense when you’re trying to keep up with multiple balances. Consider these choices carefully if you think debt consolidation is the right move for you.
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