How To Consolidate Credit Card Debt: 4 Most Effective Methods

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To consolidate credit card debt is to combine several debts you have into a new single one. The new debt should ideally have a lower interest rate than your current debt, so that the payoff time is significantly shorter.

The best way for you depends on your present total debt, your credit history and score, how much cash you have and many other aspects of your financial situation. When your ultimate goal is to pay off debt – Debt consolidation is the best method.

A credit card debt consolidation program would help you assess your debt situation in a better way. This program is devised in such a manner that the loan obtained through this program also covers all your other debts.

The important thing is to choose the best consolidation firm which gives the lowest interest rates when compared to your credit cards interest rates. Once you track on such a company, get the loan and pay off all your credit card debts. Now you would be left with only a single monthly payment to be taken care of. Furthermore as the interest rates on this loan is lower, so the monthly payments are also reduced to a large extent.

The first step to financial wellness is taking control of your credit card debt. The Payoff Loan™ gives you the power to reduce multiple high-interest payments into one low-rate monthly payment, gives you the power to reduce multiple high-interest payments into one low-rate monthly payment.

So, what is the best way to consolidate credit card debt? There are only 4 most effective methods to consolidate credit card debts:

  1. Selling house to pay off debt
  2. Personal loan to pay off debt
  3. 401(k) loan
  4. 0% balance transfer cards

1. Selling house to pay off debt (Equity Loan)

If you own a house and would like to opt for a secured loan, your interest rates would be generally lower. You might be thinking should you sell your house to pay off debt? As credit card debt consolidation loans mostly have lower interest rates, your monthly payments would be less as well & you need to pay to only on creditor. But please note that though your payments are reduced, your term of loan would be higher.

Should I refinance my house to pay off debt?

Homeowners do have additional options to avail loans as you can refinance your 1st or 2nd mortgage and use this excess cash to pay off your high interest credit card debts. The 1st mortgage is refinanced at a lowered interest rate than the second. The vital point to consider here is that this actually changes your unsecured credit card debt to a secured one. This permits a lower interest rate.

Though these loans have many advantages, it’s not without risks. One should properly investigate about the debt consolidation company before acquiring its services. There are many fraud companies in the market capitalizing on the confusion existing among the in-debt consumers. As most of them are in a state of depression, thus are unable to adequately analyze the loopholes presented by some fraud companies. It’s you who should properly investigate about the company’s whereabouts, and stuffs like how long it has been in this business, number of satisfied clientele it possesses, the affiliations it has with accredited agencies like BBB etc before you enroll with any of them.

Advantages of a home equity loan:

  • Lower interest rate than an unsecured loan
  • Does not require good credit

Disadvantages of a home equity loan:

  • Failure to pay could result in losing your house
  • Repayment terms can be 10 years or longer

2. Personal loan to pay off debt

You can use an unsecured personal loan from your local bank or credit union or an online lender to consolidate credit card or other types of debt. The loan may give you a lower interest rate on your debt or help you pay it off faster.

The lowest personal loan rates with those who have the best credit score – rates top out at 36%.

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Payoff debt Personal Loan Lenders

Personal oan lenders in most cases allow to apply for a debt consolidation loan without affecting your credit score. Unlike many banks and credit unions, lenders will easily give you a rate without making a hard inquiry about your credit score.

Also, another advantage is that lenders don’t charge early loan repayment fees, but some of them may charge upfront origination fees ranging 1-5% of your loan. They can send funds directly to your creditors, increasing the chances of a successful debt consolidation.

Here are some of the top recommended Online lenders:

refinance credit card debt
Payoff Personal Loans

  • Rates starting as low as 8% APR
  • No collateral required
  • Qualified Applicants:
    • Loan Amount: $5,000-$35,000
    • Loan Terms: 24-60 months
    • Time to Receive Funds: Varies
    • Loans are NOT offered in: MA, MS, NE, NV, OH, AND WV
loans to pay off credit card debt
Freedom Financial Network

  • Rates starting as low as 4.99% APR
  • No collateral required and No prepayment penalities
  • Qualified Applicants:
    • Loan amounts between $10K – $35K
    • FICO 670+
    • All states except: CO, CT, HI, KS, ME, NH, NY, ND, OR, RI, VT, WI, WV, WY
loans to pay off debt
The Loan Exchange

  • No collateral required and No prepayment penalities
  • If you have a current personal installment loan, mortgage or just need cash or to refinance to a lower rate The Loan Exchange has you covered.
  • One payment solution to organize finances and increase your credit score.
  • Qualified Applicants:
    • Loan amount up to $100K
    • FICO 600+
refinance credit card debt
Lending Point

  • Rates starting as low as 15.49% APR
  • Easy, automatic, online payments
  • We’ll provide you with an offer and payment options in minutes.
  • LendingPoint is an Atlanta-based direct lender, redefining who can access money at fair rates.
  • Qualified Applicants:
    • Loan amounts between $2K – $25K
    • FICO 600+

Credit Union Loans

Most credit unions offer borrowers more flexible loan terms and options, especially if you have a bad credit score. The maximum APR at a federal credit union is 18%.

Advantages of a personal loan:

  • Fixed interest rate and monthly payment
  • Fixed payment period

Disadvantages of a personal loan:

  • Lowest rates go to those with excellent credit
  • May carry an origination fee

3. Get 401(k) loan

Generally, you should not take a loan from the employer-sponsored retirement account. It may later significantly impact your retirement. But in case when, you have ruled out balance transfer cards and other loans, this could be another option for you.

A good benefit is that the 401(k) loan will not appear on your credit report. But if you can’t repay, you’ll owe a huge penalty plus taxes on the unpaid balance, and you may be left struggling with more heavy debt.

Normally 401(k) loans are due in 5 years. But if you quit/lose your job, they’re due in 2 months.

Advantages of a 401(k) loan:

  • Lower interest rate than an unsecured loan
  • You borrow money from yourself
  • Loan isn’t counted on your credit report

Disadvantages of a 401(k) loan:

  • Reduces your retirement fund
  • Heavy penalty and fees if you can’t repay
  • If you lose or leave your job, the loan is due in 60 days

4. 0% balance transfer card

This type of credit card charges no interest for a promotional period, often 1-1.5 year, and allows you to transfer all your other credit card balances over to it.

You’ll need a credit score above 690 to qualify for most cards.

Make a budget to pay off your debt by the end of the introductory period, because any remaining balance after that time will be subject to a regular credit card interest rate.

Most issuers charge a balance transfer fee of around 3%, and some also charge an annual fee. Before you choose a card, calculate whether the interest you save over time will wipe out the cost of the fee.

Balance transfers are not the same as debt consolidation, as these are never a permanent solution. Often it has been seen that balance transfers are subject to fees which are a percentage of the total amount transferred or is a specific dollar charge. Though these are easy and convenient, but are only helpful in moving your credit card debt around. You would still be subjected to late fees, high interest, and over the limit fees etc. if you charge up the balance on your new card.

Advantages of 0% balance transfer card:

  • 0% introductory interest rate

Disadvantages of 0% balance transfer card:

  • Requires good to excellent credit
  • Usually carries a balance transfer fee
  • Interest kicks in typically after 12 to 18 months

Go for a Do It Yourself Credit Cards Debt Settlement

Credit cards debt settlement is not so tough task to perform and even you can also do it for your own self. All you need is to knowledge about the law, good speaking capability, and capability of handling odds.

Debts are always terrifying thing to deal with, especially if it is the debt of credit cards. Credit cards debt is such a thing that puts our life in great danger any time if it’s not handled with care. Thus a good and effective credit cards debt settlement program is really appreciable for all those are stuck in the black hole of debts. It is not possible now to stop using credit cards, but what we can definitely do is to reduce the use and try to pay the interest on time every month, try to avoid the late payments.

If these things cannot help one to get out his or her debt then the only one way is left for one is to go for a credit cards debt settlement program. Normally this kind of programs are arranged and planned by the professional debt settlement companies and in most of the cases they become successful in giving their client a good and helpful assistance. But you can try it by your own too. And if you believe that you are good in speaking with people, handling odds and building good relationship then it is always favorable to do credit cards debt settlement program by your own self.

6 tips how to Do It Yourself

Negotiating with creditors yourself can save you money, but it is not without pitfalls. So be sure that you can handle the whole situation and then make the go for it. There are some steps to follow while doing the credit cards debt settlement by your own. Here also you have to follow a debt settlement strategy to recover your financial condition.

1. Be prepared

When you have made your mind that you will do it alone and just about to call the creditors make sure that you are prepared with some documents.

  1. A copy of your most recent bill.
  2. A specific amount you are able to pay should a settlement be reached- either a lump sum or a monthly payment amount.

2. Make the call

First and foremost thing to understand is you owe them lump sum money so don’t expect the collection department to be cordial. But before anything you should be sure on the reality that you have to make the payments and you want to as well.

3. Talk in a serious manner

Let them understand that the whole matter is very much serious for you and you want to give it a positive end. Try to speak to the relationship manager concerned and covey your stand clearly and vividly. Also keep a note of the name, designation date and time you had conversed. This may help you in case of any dispute during the settlement program.

4. Be polite

Talk politely; you are there for a negotiation and not for an argument. Using of profane language only makes things worse. Remember, most calls are actually monitored and recorded. Place yourself at their end and try to see the picture.

5. Offer Favorable Credit Settlements

The goal of settling an account is to get it reduced to a manageable amount. You want all late fees, finance charges and over the limit fees removed from your account. So choose the most favorable credit cards debt settlement program for you. But at the same time keep it in mind that it must not just in your favor.

6. Keep a Written Document

Always get a letter from the creditor with the agreed upon amount of the settlement or similar payment arrangement. A verbal agreement isn’t valid in many states and it would be your word against the collector.

Hence a do it yourself credit cards debt settlement is possible if you prepare yourself. Know the laws and rights of you as a consumer so that no one can make you a fool. Just try to make the process smooth as it can be. Avoid any kind of conflict.

Does Credit Card Debt Relief Act Exist?

Credit card debt reduction has been the wishful thoughts of most of the Americans caught in the dungeon of debts.

There exists no such credit card debt reduction program, as on date in the Fed laws, which can magically erase your debts. Some banks were given bailouts as there collapse was considered too hazardous for the US economy which was already reeling with the financial severity. But individual consumer’s debts are never considered as disastrous as that of the banks, as it’s just the cost of doing business.

Any company or firm you see or hear endorsing on the new Fed laws pertaining to debt reductions, be sure it is a scam. These are just propagandas by fake companies to capitalize on the confusions that exist among the in-debt masses pertaining to the changes in the credit markets.

Legitimate credit counselor

refinance credit card debt

The Payoff Loan is a personal loan between $5,000 and $35,000 designed to eliminate or lower your credit card balances. The Payoff Loan is designed to allow you to take control of your finances and pay your credit cards off faster. This is made possible by consolidating your high-interest card balances into one monthly payment at a fixed rate and term.

The best way to clear any doubts rising in your mind would be to take the assistance of a legitimate credit counselor of the National Foundation for Credit Counseling. These counselors can give a better idea on your debt situation and could even suggest you some debt management plans to get your debts paid off. An appointment with a bankruptcy attorney would also be a good option. Meeting both the counselor and a bankruptcy attorney would give you a fair idea on the various options you have in hand.

There are few who are successful in settling their debts for far less than what they actually owe, but there are also many who end up getting sued for their trials to wind up. If you find neither nether credit counseling nor bankruptcy suits you, then maybe you can ask the bankruptcy attorney for a good suggestion matching your needs.

But apart from all these, you yourself are prudent enough to find the solution which suits best for your credit card debt reduction. None other than you know your financial status quo better than anyone else. Thus you would be either ways the best person to judge the program that is most affordable and relevant with your current requirements. You can even pursue debt settlement on your own, without the presence of a debt settlement company.

Negotiate with the creditor

What you need to do is to contact the creditor and offer them a lowered cash settlement. The creditor might or might not accept this offer. You can continue with the negotiation for a reasonable settlement if they refuse on the first go. Again there is no assurance that hiring a debt settlement company can get you a lowered settlement figure which would be acceptable and affordable by you. Thus self help is the best help on such cases.

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