The 2016 Quarterly Financial Report of the Federal Reserve shows that Americans owe $ 12. 35 trillion total in all debts. Of that, $ 747 billion is due on credit cards.
That is a lot of debt and a lot of credit card debt. It is therefore no surprise that paying off debts is the number one money resolution for 2017, according to the loan resolution survey by Student Loan Hero. If you think you’re drowning in credit card debt, you may be one of those determined to pay it all in 2017. One way to do that effectively is to consolidate your credit card debt. (For more: Credit Card Debt: America’s biggest fight?)
What is credit card consolidation?
Debt consolidation is about taking different loans and combining them into one. There are a number of reasons why you might want to do this, but there are usually a few important goals behind consolidation.
First, your payments are limited to only one during the month by consolidating your credit cards. This simplifies your bills and reduces the chance of forgetting one, resulting in a missed payment. In addition, your credit card interest rate is no. Kurtzijk high. It is common to pay between 17% APR and 22% APR on your credit cards. That is a large part of your payment that goes to interest every month instead of paying the principal. Consolidation can help you roll up high-interest credit card debt into a low-interest loan.
But there are different ways to consolidate credit card debts and not everything is the right option for you. Before you sign up, read here what you need to know about credit card consolidation.
Credit card balance transfer
One of the most popular ways to consolidate credit card debts is to use a balance transfer. At the start of the year, you can start getting offers from credit card companies for an introductory rate of 0% APR when you move a balance from one credit card to another.
These transfer offers usually offer you the option of not paying interest on the balance for 12 to 24 months. During this time you can place 100% of your payments in the direction of the client. If you have several smaller credit balances, you can use these in a simple way to quickly settle that debt to a new card with 0%. (For more information, see Expert tips for reducing credit card debt .)
Before you transfer your credit card, you know that you are warning. Kurtzijk pays a balance transfer price. Some credit cards waive the costs as part of a promotion, but there is a good chance that you will have to pay a fee. However, the interest savings can be large enough to make up for it.
This is of course only a good strategy if you pay the full balance before the promotion period ends. Make a plan to pay a large part of the balance every month before you have to pay interest again.
Consolidate debt with a person.
Another smart option is to consolidate credit card debts with a person. Kurtzijke loan. You do not receive a 0% APR, but you may receive a fixed interest rate that is much lower than what you now pay on your credit cards.
In addition, many credit cards have variable rates. With the recent interest rate hike from the Federal Reserve and expectations for another in 2017, your debt could become even more expensive. A person. Kurtzijke loan with a fixed interest rate locks you for a lower rate for the duration of the loan.
Every lender is different, but you can generally borrow anywhere from $ 5,000 to $ 50,000 with a repayment period of three to seven years. Keep in mind that in most cases you are decent. Kurtzijk must have credit, as well as proof of a fixed income.
Home Equity: Think Twice
It may be tempting to use your equity to consolidate credit card debts, but it is usually not the best choice. Yes, you can usually get a much lower interest rate and in some cases the interest you pay is tax deductible.
However, do not forget that you assume an unsecured credit card debt and turn it into a debt secured by your greatest asset: your home. If you are unable to make payments on the loan or credit line, you run the risk of losing your home. Carefully reject the pros and cons before you take the step to use the equity of your home to consolidate the credit card debt in the new year.
Don’t forget to look at your expenses
None of these methods is important if you have not changed your spending pattern. It only works to consolidate credit card debt if you no longer spend more than you earn. Debt is usually a symptom of other financial problems. View the way you spend your money. Are your expenses more than your income? Where can you cut back?
It is important to be honest when you look at your habits. Before you move to consolidate your credit card debt, make a plan to reform your spending. That way you can spend this year paying off your debt and your year. Kurtzang remain debt free. (For more information, see: Credit card debt: 6 ways to get rid of uch .)