Credit card are a handy financial tool — one that 88% of working Americans like to use, according to Salary Finance Fourth Annual Report. But of those, about a third consistently carry over a balance from month to month. And of those who do, 41% have a balance over $3,000.
The problem with achieving a balance, however, is twofold. First, the more money you owe on your credit cards, the more interest you will accrue. It is effectively the same as throwing away money.
Plus, too much credit card debt could hurt your credit score. And once that number drops, borrowing might become more difficult.
If you owe a large enough sum on your credit cards, it is important that you pay it off as soon as possible. Here are some options that can make your debt more affordable, paving the way for faster repayment.
1. Perform a balance transfer
A balance transfer allows you to move your existing credit card balances onto a single card. Why is it advantageous? Many balance transfer cards come with a 0% introductory interest rate. And if you get a break from accumulating interest on your debt, it can help you get out of the hole you’re in more easily.
Of course, these introductory periods don’t last forever. But if you manage to get a 12 or 15 month reprieve on accrued interest, it could make a big difference.
2. Take out a personal loan
With a Personal loan, you borrow a lump sum of money that you can use for any purpose. If you take out a personal loan, you can use your proceeds to pay off your credit cards, leaving you with only the loan balance to pay.
Why is it useful? Personal loans generally charge less interest than credit cards. If you manage to significantly reduce the interest rate on your debt, it becomes cheaper and easier to repay.
3. Tap your home equity
If you own a house, you have equity in, you can borrow to pay off your credit cards. First, you may consider removing a home equity loan and apply the same approach as for a personal loan. Home equity loan interest rates are generally much lower than credit card interest rates.
Another option is to make a cash refinance, where you take out a new mortgage with a balance greater than what you currently owe on your home. The excess money you borrow can be used to pay off your debt. And as you might have guessed, you’ll generally pay a much lower interest rate on a new mortgage than on credit cards.
Credit card debt can hurt you financially and affect your mental health. If you’re trapped in a cycle of credit card debt, it’s imperative that you do everything you can to get out of it as quickly as possible. And each of these options could be your ticket to getting rid of that debt sooner.
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