Hi there! The New Year has just begun. Everyone has taken new oaths and made resolutions. If you ask for my suggestion, I will tell you to first get out of credit card debt/debts in the New Year. Make it your resolution for the New Year so that you do not have to pay out a huge interest rate on credit card anymore.
Here are 5 simple ways to get out of credit card debt quickly.
- You can opt for debt management programs to get out of credit card debt in 2020
The non-profit credit counseling agency may help you with debt management programs when you are suffering from debt problems and a bad credit score.
What are debt management programs?
The non-profit agency may figure out a debt management plan for you to get rid of your credit card debt.
First, you have to sign a deal with the credit counseling agencies.
Second, make a single monthly payment to them each month.
Third, the credit counseling firm will disburse the amount among your multiple creditors.
NFCC and the National Foundation for Credit Counseling are good places to start the program.
How the debt management program will help you
- The credit counseling firm will guide you on how to make a budget. The training will be ideal for you to avoid such credit card debts in the future.
Under the program, the non-profit agency will negotiate with the creditors to lessen your interest rate.
- The creditors may offer you a longer payment duration after the negotiation.
2. You can consolidate your credit card debts in 2 methods
You can choose credit card debt consolidation to get out of credit card debt. The debt consolidation will help you by merging the multiple debts into a single debt.
Check out the balance transfer method to pay off the credit balance with 0% interest rate
Choose a balance transfer card if you have a huge outstanding balance on a high-interest credit card. The balance transfer card may offer you a 0% interest rate or a low-interest rate on the outstanding balance, in the introductory period.
The introductory period stretches from 6 months to 18 months. In this span, the interest rate on your transferred outstanding balance will be minimal or zero.
You can opt for the balance transfer method. It is okay. But you can only avail of this option when you have a good credit score.
Usually, 700 points or above is considered a good credit score in the US.
What to do when your credit score is not good enough to impress a lender?
Try out home equity loans.
B. Home equity loans:
Home equity loans can help you consolidate your credit card debt apart from your balance transfer method.
What do home equity loans mean?
You are applying for a loan by keeping the equity of your house in the collateral mode. Use this loan to repay your multiple credit card debts.
How do you get help with home equity loans?
You will get a low-interest rate option to pay off your credit card debt if you have opted for home equity loans.
But my suggestion is to choose the home equity loan option only when your credit score is not good. If you fail to pay off the debt, then there is a huge chance your house will be seized.
3. Borrow money from peer-to-peer lenders to repay credit card balance
Have you heard about Funding Circle, Upstart, and Prosper Marketplace? Well, these 3 names are considered reputed P2P (peer-to-peer) lenders. The interest rate depends on the loan term and the credit rating of that particular borrower.
You may get a new loan at a 5.6% interest rate in peer-to-peer lending if you have a brilliant credit score. In comparison, the interest rates on credit cards are 14.08% for the ‘Excellent Credit’ category and 20.68% for the ‘Good Credit’ category respectively.
Calculate how much money you are saving each month by borrowing from a P2P lender to pay off your outstanding credit card debt. You can borrow up to $25,000 from a P2P lending platform to pay off your credit debt.
4. Try out the debt snowball & debt avalanche method to pay off your debt
First, we should discuss the debt snowball method. Start by paying off the smallest credit card debt. When the first and smallest debt payment is over, concentrate on the second smallest debt payment. Continue this debt payoff formula until all the debt repayment is over.
The debt avalanche is just the opposite of the debt snowball method. Here, you can start by paying off the highest credit card balance instead of the smallest one. After the highest debt repayment is over, next concentrate on the second-highest outstanding balance. Gradually, pay off the debt from the top level to the bottom level smallest debt.
5. Negotiate with the credit card company to repay your debt
Never hesitate and make direct contact with the credit card company if you are going through a troubled financial condition. Credit card firms may offer you relief for a short while on interest rates. You must be clear about the duration of the interest-rate-relief-period in the first meeting with them. It is very important. Try to clear the credit card’s outstanding balance within the relief period of the reduced interest rate.
However, a financial coach may help you while you are in troubled financial condition due to your credit card debt. A financial coach works with the clients at close quarters and helps them to get out of a finance-related distressful and stressful situation in a soothing way. It will be better for you to consult a financial coach for a debt-relief plan to get out of credit card debt quickly in 2020.