Four Ways To Consolidate Credit Card Debt
Credit cards are important financial assets to have because you never know when you may need to use them, such as when you need to make a payment and it’s one day before your paycheck arrives. Using them correctly can also improve your credit score, and if that improves you can get good loan deals when you need them.
But if you’re not careful, your credit cards can turn into a lot of debt that you’re carrying, and if you realize credit card debt is piling up quicker than you can pay it off, it may be time to change how you use your credit cards and start consolidating your debt. But how can you do this? There are four ways you might consider doing it.
Resolving Debt With Creditors On Your Own
As you realize you have a lot of credit card debt, you’re going to have to make changes for sure and in some cases at least temporarily stop using the credit card. But you don’t have to panic, and in fact, you shouldn’t because credit card debt is beatable.
What you can do first is start cutting out services you’re billed for that you don’t need, and then make a list of your credit card balances and how much you need to allocate to paying them off. Usually, if you’re unable to pay off high balances in full, credit card providers will allow you to pay them off in installments. But the main thing is to work with your creditors on how and when you can do this, and make sure you have a good budget and payment plan in place.
Working With A Certified Debt Counseling Agency
If you’re having trouble getting a payment plan worked out with your creditors, you may be able to get outside help to do it. Various organizations such as financial institutions or universities, consumer financial protection organizations, and other non-profit groups may have these debt counseling services. But there are several things you should do before turning over your credit card debt consolidation to any of these agencies:
- Make sure that you’re working with a licensed and certified counselor
- Check them against your local consumer protection bureau or your state’s attorney general office to see if they’ve had complaints
- Make sure they are honest about any fees they charge, and never signup with an agency whose monthly payments get too high to afford
- Make sure they are focused on actual budgeting and financial education and not simply a debt management plan
- Ask for references from other clients who have benefited from the agency’s services.
If working with a debt counseling agency doesn’t prove to be productive in debt consolidation, and you don’t have any other options, you may want to look at filing for Chapter 13 bankruptcy. But because things can get complicated and your credit score can be greatly damaged, you’ll want to proceed with caution if you consider filing for bankruptcy.
Borrowing From Your Life Insurance Or 401k Account
If you need a little help to pay down credit card debt and don’t have immediate savings to draw from, you might want to take funds from a life insurance policy if you have one. If you have enough cash value in the policy to pay off all or most of your debt, you can use it to do so. But be warned that if you don’t repay the funds back, the beneficiaries of your death payout will get little or no payments.
You can also borrow from a 401k account if you have funds saved up there, but here as well you’ll want to pay back what you borrowed within five years so that you don’t get hit with early withdrawal penalties and taxes by the IRS, and you shouldn’t do this if you’re going to be moving to another job soon.
Getting A Debt Consolidation Loan
Sometimes the best way to get your debt consolidated is through the usual way with a debt consolidation loan. This could be a home equity loan or line of credit, but it could also be an unsecured loan with fair interest rates as the Trout Associates offers.
Their loan is specifically there to merge the debt from all your credit cards into one with affordable monthly payments. You do want to watch out for interest rates and any early payment penalties with a debt consolidation loan, but in most cases, you can avoid those.