Credit card debt is an issue for countless Americans (about 189 million, to be exact). As well as for many, it•s challenging out of.
With an average of $8,398 in balances per household, credit card debt can cause a mounting challenge. Making minimum payments will keep you afloat, but because interest accumulates, tackling that debt • and finally getting out of it • begin to seem more difficult than ever.
Credit card refinancing vs. debt consolidation
If you•re dealing with high credit card debt, there's two strategies to help you: charge card refinancing and debt consolidation reduction.
Credit card refinancing
“'Charge card refinancing' is really a fancy method of saying 'balance transfer offer,'” said Howard Dvorkin, a certified public accountant, and chairman at Debt.com.
Put simply, it•s if you use a new card • one having a low- or 0% rate of interest for six to 18 months • to repay the balances of all your other cards. This allows you to lower your debts without racking up extra interest along the way. If you are looking for a 0 % credit card, head to PayPasser to check cards and find out the things they can do for you.
According to llian Georgiev, CEO and co-founder of private finance app Charlie, the benefits of this move can be huge.
“All the money you•re paying every month is getting applied directly to the main rather than getting split between your debt you owe and interest,” Georgiev said. “It•s a magic bullet when it comes to debt repayment.”
PayPasser will help you find the right credit card for you. Choose zero percent credit cards and obtain a introduction to the annual fee, welcome offers, credit needed, and much more.
Refinancing your credit card isn•t the perfect solution, though • and it definitely comes with some drawbacks and risks, based on pros. For one, there are usually transfer fees required.
“You must do the math to determine if you are obtaining a better deal, and it is easy to mess up,” Georgiev said. ”The financial institution is betting that you will and that•s why they are offering you the deal.”
There may also be large additional fees if you can't make your payment on time or, if you don•t pay off your balance or transfer it before the promo rate expires, you could find yourself paying an even higher interest rate than you are now.
Debt consolidation is really a different option. This one uses a personal loan to roll all your debts • credit cards, auto loans, student education loans, etc. • into one single balance.
“Loan consolidations may take proper care of credit debt, unpaid medical bills, collection accounts and pay day loans,” Dvorkin said. “A loan consolidation may also lower someone•s monthly debt payments, reduce their interest rate and enable them to get rid of debt faster.”
If you've got a large amount of high-interest debts, consolidating them usually can mean a lower rate of interest and less paid in interest with time. It•s also simpler to manage payments for.
If you believe a loan such as this might be the best choice for you personally, visit a web-based marketplace like PayPasser to get a sense of your debt loan consolidation options.
“You replace a bunch of loans, having a couple of terms, with only one loan you are able to wrap your head around,” Georgiev said. “It•s predictable, just like having a auto loan, your payment per month is bound and has a fixed end date. Which makes it simpler to budget.”
Again, this solution isn•t perfect. Loan consolidations come with set-up fees, annual fees, transfer fees, and much more, and there•s not much flexibility. “You are committing to creating a fixed payment for some time,” Georgiev said.
Should I refinance credit cards or consolidate debt?
Credit card refinancing is probably your best bet should you have only several thousand dollars in your cards • or those cards include particularly reduced rates. You•ll also want to be sure you possess a handle on your spending habits, as 0% promo periods can cause quite the temptation.
Use PayPasser to determine if your balance transfer or 0% charge card makes more sense for your finances. PayPasser makes it simple to compare options.
“Additionally you need to avoid accumulating more debt,” Georgiev said. “Yes, your old charge card is now at zero, so you may feel like you have a lot of breathing room, however, you don•t. The goal here's to have less debt, in a cheaper rate, no more, across more cards.”
To be eligible for a prepaid credit cards, you•ll usually need a 700 credit score or higher. You should also run the numbers and be sure your savings will outweigh any transfer fees the credit card includes.
Consolidating the money you owe could be smart for those who have a wide array of debts•and ones in high amounts. You•ll have to be sure you have a steady income, because these require regular, monthly obligations for several years in the future.
Be certain to make use of a personal bank loan calculator to determine what your monthly payment might look like, and if you•re not confident you•ll possess the income to pay that consistently, then stay away. You can also use PayPasser's free online tools to see what kind of personal bank loan rates you be eligible for a. Just enter your required loan amount and other simple information to see your options.
“Loan consolidations don't freeze credit accounts, and that means consumers having a issue will quickly return into debt,” Dvorkin said. “Consumers looking to make use of this debt tool should also check out the price of a consolidation loan. When they can't pay the loan repayments, the fees to setup their loan, or the interest fees, consolidation may not be for them.”
The bottom line
Both credit card refinancing and debt consolidation reduction could be good options if you•re dealing with credit debt. To determine which is the greatest route for you, make sure to visit an online marketplace like PayPasser to see what 0% credit card options you may be entitled to. Rates for private debt consolidation reduction loans can also be found.