If you are dealing with credit card debt, you are not alone. Credit card debt stands at $ 14.3 trillion, up 1.1% from the previous quarter, according to US credit cards. latest data Federal Reserve System of New York.
Fortunately, there are ways to avoid the debt cycle. Below are four proven methods of paying off credit card debt. Read one below to learn about each of them, as well as take a closer look at the pros and cons. Armed with this knowledge, you will be able to make an informed decision about which debt repayment strategy might be best for you.
1. Consolidate your credit card debt with a personal loan.
The first debt repayment strategy is to consolidate credit card debt with a mortgage loan.
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With a debt consolidation loan, you can consolidate balances on multiple credit cards into one. You will use the funds of the loan to pay off your credit cards, and then you will only be liable for one monthly payment on your debts.
Personal loans often offer a lower interest rate than credit cards, which means that choosing this method can help you save on the total amount you pay as interest. Plus, this repayment strategy will help simplify your finances as you no longer have to worry about making multiple credit card payments every month.
As with any new type of financing, you will need to meet the lender’s requirements in order to qualify for a debt consolidation loan, which will likely require checking your credit history. If you have a lower credit rating, chances are that you will not be eligible for a loan large enough to cover all of your debts. Also, it is important to know that some lenders charge a prepayment to close the loan.
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2. Open the balance transfer card.
Like a debt consolidation loan balance of transfer card allows you to combine balances on existing credit cards into one. Typically, these cards also offer initial interest rate 0% per annum on a balance transfer, which will allow you to work on debt repayment for a certain period of time without charging any new interest.
If you can pay off your balance before the end of the initial interest period, you will save money as you do not have to pay interest. As an added bonus, knowing that this period is limited in time can help keep you motivated to pay off your debts.
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If you are unable to redeem your balance by the time the introductory rate period ends, you will begin to accrue new interest at the normal card balance transfer rate. In addition, if you pay late, it is possible that the original billing period will be canceled.
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3. Use the debt snowball method.
FROM debt snowball method, you will leave your existing credit card balance as it is. When implementing this debt repayment strategy, you will continue to make the minimum payment on most of your cards. At the same time, you will focus your energies on paying out the card with the lowest balance.
After you pay for this card, you will focus on paying out the card with the next lowest balance. You will continue this way until you have paid all your cards in full.
By paying for the card with the lowest balance first, you are setting yourself up for a streak of quick wins that can help you feel more motivated to continue. pay off your debts…
The debt snowball method does not account for interest payments. Solving your smallest debts in the first place may lead you to pay more interest over time.
4. Use the debt avalanche method.
IN debt avalanche method is the inverse of the debt snowball method. In this case, you will first focus on paying out the card with the highest interest rate. Once redeemed, you will move on to redeem the card at the next highest interest rate until all of your debts are paid in full.
Using this method will help you save on the total amount of interest you will pay. By paying off the highest interest debts first, you end up paying less over time.
It can take longer to see progress with this method, especially if your card with the highest interest rate also has a large balance.
Ultimately, choosing the right debt repayment strategy is a personal choice. However, it can be helpful to look at factors such as whether your credit history is good enough to open a new card or take out a new loan. Then, after you have chosen a strategy and worked on paying off your debts, it is very important to implement better credit habits in the future. For example, you may decide to charge only the amount that you can afford to pay in full.