Many people are strapped with high-interest credit card debt with the inclination to find a way out. There are actually many different methods for eliminating the high interests by placing it in another platform like consolidating it into a personal loan, perhaps taking a home equity to pay the debt, tapping into a 401k. Read for ways to consolidate credit card debt.

Among the most favored options for getting some of the debt paid down and potentially saving some money in the process include “balance transfer credit” and debt consolidation. 

With balance transfer credit, the debt is transferred from the existing cards to a new card offering low introductory rates, often as low as 0% interest for the entire period.

With debt consolidation, the refinansiere kredittkort (refinancing credit cards) is done with an unsecured personal loan that will pay off the debt with a lower interest rate requiring a single monthly repayment.

Of course, there are more stringent requirements with transferring debt to an introductory credit card. You need to have very good credit with a relatively small balance that you can pay within the initial period before the rates rise. 

Plus, there are balance transfer fees that equate to roughly 5 percent of the monies transferred.

The Fundamentals Of A Balance Transfer Credit Card

Typically these credit cards charge 0% APR for transferred balances for a specific introductory period. These are generally better for smaller debt, so you can be assured to get it paid before the interest accrues. 

The time period you have to work on your debt can last up to 20 months with some cards. It’s an easy method to manipulate credit to refinance exuberant debt. 

The option can be beneficial in chipping away at excessive debt. Still, it’s critical to use these in the way they’re meant to be since their interest rates after the introductory period are significantly higher than other cards. 

If you cannot get the balance paid before the interest kicks in or continue to use the card to make purchases, you could have a more significant debt loop than you started with. What are some pros of this option; let’s see.

1. Debt reduction with no interest for a set period.
2. All money goes to the principal since there’s no interest meaning you can chip away at the balance.
3. Many cards that offer 0% APR balance transfers waive the annual fee.
4. Some of these cards include incentives like consumer protection or spending rewards. It’s not likely you’ll want to spend.

What are some cons of using this method to eliminate your credit card debt:

1. The introductory period is short-lived. That means the balance needs to be something that can be paid off within that timeframe to avoid higher interest rates than on the original debt.
2. Debt remaining will incur interest at the standard variable rate, which is often much higher for these cards.
3. From the beginning, there will be transfer fees tacked onto the balance of roughly 5%.
4. It’s essential not to continue to use the card for purchases. It defeats the purpose of getting out of high-interest debt.

Before you apply for a balance transfer credit card, it’s wise to check out your credit report and score, plus gather the information generally required, like income. You’ll want to check each company for their APR, fees, credit requirements to see who offers the best terms.

The Fundamentals Of A Debt Consolidation Loan

When you want to pay down your debt with an unsecured personal loan meant to consolidate the debt into a single payment, it’s referenced as a debt consolidation loan. 

These provide clients with everything fixed, so they have no fear of anything changing. That includes the interest rate, monthly repayment, and the term for payoff. The date that you will become debt-free will be apparent.

Many people feel this option makes the repayment process much more straightforward and accessible. Not only do you use the funds from the loan to pay off the high-interest debts, but you’re left with only a single monthly expense which ends up saving you considerable money. 

That doesn’t mean your debt disappeared or that you won’t still be paying on it. It simply means you moved the funds around to make it more manageable. The interest might be less, and you might save some money, but it’s critical to be careful with your household budget. 

The repayments need to be consistent to ensure payoff on time. What are some pros of this method; let’s see.

1. Having fixed features means you can focus on a set date for a loan’s payoff, plus rest assured that the monthly repayment and the terms will remain consistent for the life of the loan.
2. Terms for repayment of personal loans can be extensive, allowing a longer period for payoff.

There aren’t too many downsides to obtaining a personal loan for credit card refinancing. The only things suggested are:

1. You will typically be charged fees like application costs and origination fees.
2. There won’t be a 0% APR for any length of time.

When looking into various lenders to apply for a refinance of credit cards, it’s often wise to speak with a financial advisor who will help with the application process and send these to reputable lenders in the industry. Getting prequalified is often wise so that you can compare terms and rates.

Making The Decision Between The Balance Transfer And The Debt Consolidation

Deciding between the balance transfer and debt consolidation could be challenging, depending on your specific financial circumstances. Many people want to choose the balance transfer since they’ll be forced to pay the balance off at a fast pace. 

But you have to consider whether you’ll be able to afford those payments, especially if you owe a few thousand dollars and you’re given a 12-month window to pay it off.

• Interest rates

While the 0% APR is appealing and getting the payoff taken care of quickly is your goal, the amount of the monthly repayment needs to be taken into consideration. That’s especially true if it puts other aspects of your financial situation in hardship. 

Personal loans don’t offer such a low-interest rate, but their interest rates are amicable, and you can likely pay it off as quickly as you’d like, but there’s no pressure with these. Nothing will happen if you don’t.

If you look at your finances and believe you can achieve the goal with the balance transfer, then that’s probably your go-to. Think it through carefully because you’ll be hit with high interest once the timeframe is up.

• Fees

Many balance transfers will include a debt transfer fee tacking onto the balance as much as 5%. However, that would be cheaper than taking a personal loan with perhaps a 10% interest rate for 12 months. 

Plus, some personal loans will charge an origination fee that’s taken out of the money you receive. Credit unions and banks generally don’t make this a practice.

These can be as great as 8% of the total amount when they are charged. There are situations where it makes sense to pay fees if you’re getting terms and rates that work the best for you.

• Fixed-rate and payment schedule

The nice thing about a personal loan is you have an interest rate that never changes with a set payoff date and repayments that are predictable, allowing for easy budgeting with your finances. 

With a balance transfer, you might tend to spend, creating more debt, setting you up for the potential to not hit payoff and be left with a more significant interest payment. 

Final Thought

There are many more options for paying off credit card debt, whether you choose to use your home, your retirement, so many choices. These are not the only two available. Learn how to refinance credit card debt at https://www.needhelppayingbills.com/html/refinance_credit_card_debt.html.

More people find these to be the most favorable for chipping away at high-interest credit cards since they seem to be the ones with the least repercussions to their finances, but that depends on how you handle yourself with the options. 

If you get a balance transfer and you’re not responsible by making regular repayments, you will be left with more outstanding debt in the end, especially if you choose to make purchases with the card.

That isn’t saying you couldn’t create more debt when taking a personal loan. People do get more credit cards making more debt even after eliminating high-interest cards. It’s a cycle and a learning process.