Here’s What You Can Do to Pay Off Credit Card Debt and Save Money on Interest
Credit cards are a flexible, widely accepted payment option that allows consumers to spread out large payments over time. But credit card interest rates have been rising steadily and recently crossed 17% for only the second time, Per Federal Reserve data.
The average rate of interest on all credit card accounts stood at 17.13% in the third quarter of 2021. It was up 16.3% in the second quarter and 15.91% at the beginning of the year. The only time credit card rates were so high was in 2019, when interest rates rose to 17.14%.
Borrowers who consolidated credit card debt saved an average of $2K+, data shows
According to the Fed, rapidly rising credit card rates — along with a 10.9% increase in revolving loan balances in the second quarter of this year — could spell disaster for consumers who have trouble making consistent monthly payments on their credit balances. it occurs.
Carrying high-interest revolving credit card debt from month to month can cost you hundreds or even thousands of dollars in interest payments over time. Thankfully, there are some ways to pay off credit card debt faster and save money in the long run.
Keep reading to learn more about credit card consolidation, and compare your options in the sections below. When you’re ready to get your credit card debt under control, visit Reliable to compare interest rates on several financial products for debt consolidation.
Average personal loan interest rates fall to 2021 lows, Fed reports
3 Proven Methods for Credit Card Consolidation
Since credit cards have some of the highest interest rates on the market, making minimum payments each month is not a very efficient method of loan repayment. In fact, depending on your account balance and interest rate, it could cost you thousands of dollars in compound interest over time.
Here are three common ways you can pay off credit card debt faster:
Consider each option in the sections below, taking into account your unique financial situation.
Debt Snowball Method Vs. debt avalanche method
Personal loans offer fast, one-time funding that you repay in fixed monthly payments over a specified period of time, usually a few years. Because personal loans have a consistent repayment schedule and low interest rates, they are commonly used to consolidate high-interest credit card debt.
Unsecured personal loans do not require collateral, which means that eligibility and interest rates depend heavily on your credit history and debt-to-income ratio. Applicants with good credit will receive the most favorable loan offers with low interest rates, while those with poor credit should build their credit score before applying.
Raising your credit score can be as simple as checking your credit report for errors, or opening a secured credit card to increase your available credit and lower your credit utilization ratio.
When you’re ready to apply for a debt consolidation loan, be sure to compare rates on Credible so you know you’re getting the best deal over the long term.
Paying Off A Student Loan With A Credit Card? here’s what to consider
Taking out another credit card to pay off your loan may seem counterintuitive, but you may be able to save on interest charges during the loan payment process with a balance transfer.
The key is to find a credit card issuer that offers a 0% APR introductory period — usually up to 18 months. Once that’s done, do a credit card balance transfer to transfer your loan from your current account to a new credit card. Then make sure to pay off your loan in full before the promotional period ends.
Here are a few things to keep in mind when using balance transfer:
- You may have to pay a balance transfer fee of around 3-5% of the total amount of the loan being transferred.
- You will need good credit to qualify for a balance transfer card. Keep making payments on time to ensure that your credit score is not affected before applying.
- Avoid taking on any new debt during this time so as not to fall into bad habits by racking up more credit card debt than you can pay.
If you decide to use a balance transfer card for debt relief, compare the offers from several credit card issuers on Credible’s online financial marketplace.
Debt Consolidation Vs. Debt Settlement: What’s the Difference?
Home values are at an all-time high, which means you could be sitting on thousands of dollars worth of unused equity. One way to pay off your credit card accounts at a lower interest rate is to access that equity through cash-out refinancing.
Cash-out mortgage refinancing is when you take out a larger mortgage than you currently owe on your home loan, pocketing the difference in a lump sum cash to use as you see fit. As mortgage rates are still hovering near all-time lows, According to Freddie MacoNow may be a good time to refinance your mortgage.
Keep in mind that when you are taking a larger home loan, the cash-out mortgage referee will increase your monthly payment.
Contact an experienced loan officer at Credible to see if this is the right loan repayment option for you.
How Debt Relief Programs from a Credit Counselor Can Help Pay Off Your Debts
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