It is overwhelming to have a huge amount of debt on your credit card. Even when you regularly pay the minimum amounts due, the balance does not seem to reduce at all. If you want to eliminate credit card debt, then there are several ways of doing this. The key to success is consistency in your approach for reaching this goal, which means making a plan and sticking to it.
The type of option you choose to eliminate credit card debt will depend mainly on your credit score. The following options are best for people having good credit.
Balance Transfers are the simplest method for balance consolidation, and lowering the rate of interest. You can qualify for balance transfer when your credit score is good, and you can transfer all balances of various credit cards to a single one that has a 0% or very low introductory rate. This introductory offer will last you for a year or half. During this period, you will be paying very little, or no interest, which gives you the opportunity to pay off major part of the principal. However, read the terms carefully, as certain companies will have a transfer fee, and make sure the rate after the introductory offer, is lower than your current rate.
Home Refinance is another option. If you own your home, and there is an equity build-up, then this option is quite good. Interest rates on credit cards are much higher than home loans, and interest on home loans are tax deductible.
If you already have a mortgage, then this loan will carry marginally higher rates than the existing mortgage.
Home refinance is also referred to as cash-out refinance, and your mortgage will be fully refinanced. The amount of cash you can get will be determined by the accrued equity and the owed balance, and the interest will be quite low.
Take out a Consolidation Loan. This is a personal unsecured loan, mainly for paying off debts on credit cards. The rate of interest will be high as it is an unsecured loan, but you do not face the risk of forfeiting your home, if you fail to pay your installments.
In case of a poor credit score, the following options are suitable-
Credit Counseling help and advice is another route. Here you work with a credit counselor who will try to get a reasonable payment option from your creditors. The counselor tries to get your rate of interest reduced and formulates a monthly payment plan, for which you are charged upfront fees.
Debt Settlement is one of the last options. In this plan, a firm negotiates on your behalf, to reduce the outstanding balance and interest rates from your creditors. Payments are made to the firm doing the debt settlement, and they in turn pay off creditors on reaching a certain amount.
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