Banking Industry CIO Perspectives | Monday, May 30, 2022
If you’re having trouble making monthly payments on multiple credit cards, debt consolidation may be the best option.
Fremont, California: It can be overwhelming to pay all your credit card bills at once, especially if the user has a high interest rate or a huge balance on many cards. If customers are struggling to make monthly payments on multiple credit cards, debt consolidation may be the best option.
Consolidating existing debt involves combining all existing debt, whether credit card bills or loan repayments, into one monthly payment. This can be a great answer if users have multiple credit card accounts or loans and want to simplify or minimize monthly payments.
There are several methods of debt consolidation. Let’s go over some of the more common methods:
Use a credit card with balance transfer
Balance transfer cards, which allow users to transfer high-interest debt to a new, low-interest account, should be among the first debt consolidation choices users consider.
Use the equity in your home
One could use the equity in their property to consolidate credit card debt. For example, with a cash refinance or home equity loan, homeowners with lots of high-interest credit card debt can save money on interest payments and pay off their amounts faster.
Apply for a personal loan
Given the financial situation, using a personal loan to consolidate credit card debt could be a smart alternative. Personal loans are popular ways to consolidate credit card debt because they offer a predictable process for quick repayment.
Consider a 401(k) loan
A 401(k) loan is the best strategy for consolidating credit card debt. Additionally, borrowing against retirement assets may be what users need if they are in financial difficulty, but they are sure they will be able to get back on track shortly.
Use a debt management program
A debt management program (DMP) can help clients reduce overall interest rates, which means more of each monthly payment is applied to the principal balance – and less to interest. Assuming users don’t think they will be able to repay debts in three years (if not related to a specific purchase), or if user wants to consolidate without borrowing money or establishing a new line of credit is an excellent alternative.