A personal loan isn’t the only way to get out of credit card debt. Consider some of your other options below:
Take Out A Debt Consolidation Loan
Personal loans aren’t the only options for debt consolidation. A home equity loan is similar in that you receive a lump sum of money with which you can pay for a large purchase, or in this case, pay off credit card debt. Unlike a personal loan, however, a home equity loan isn’t unsecured. Since you’re borrowing against the equity of your home, your home is offered up as collateral to secure the loan. This means if you default on the loan, you could lose your home through foreclosure.
Similarly, a home equity line of credit (HELOC) allows you to borrow against your home’s equity as a form of revolving debt, much like a credit card. As with a home equity loan, your home is used as collateral, and you risk losing it if you can’t make your monthly payments.
Apply For A Balance Transfer Card
Getting a balance transfer can consolidate your credit card debt in a similar way as a personal loan. A balance transfer card can allow you to move the collected balances of all your credit cards onto a single new card that you can then pay off month-to-month. Some lenders will offer a 0% APR introductory period, too, and if you can repay your entire balance within this time frame, you could save yourself a lot in interest charges.
That doesn't mean everything is free, though. You’ll pay a balance transfer fee of 3 – 5% of your transferred amount, and possibly annual fees – with interest – after that. Additionally, a typical introductory period can last 12 – 18 months, and if you can’t repay your full balance within that time, you’ll then be paying your new card’s APR.
Make Additional Payments
If you want to tackle your mountain of credit card debt yourself, without the help of a loan, you should be prepared to pay a little extra month-to-month.
When you get your monthly credit card statement, it’ll tell you what your current balance is and request a minimum amount for you to pay. If you’re financially able to, put a little more toward each monthly payment. That should speed up the process of paying your balance down. Only pay what you can afford, though.
If you have multiple credit cards, there are a couple strategies you can consider using to pay them off one-by-one. You can adopt the avalanche method, wherein you target your cards with the highest interest rates first. This method could save you a lot in interest down the line.
The debt snowball method encourages you to focus your extra payments on your cards with the smallest balances first. This can be a rewarding method for those in debt, as it can offer faster results by letting you see your smaller debts disappear before your eyes. If your cards with the lowest balances also have the highest interest, all the better!
Again, only make additional payments if you can afford to do so, or you could end up draining your finances.
Try Debt Settlement
You can also try talking with your creditors and negotiate a debt settlement, or do so through a debt settlement company. If successful, your credit card provider might be willing to forgive a portion of the debt you owe. Keep in mind, though, if you have multiple cards, you’ll have to individually negotiate with each provider, and not all of them may agree to forgive your debt.
Working with a debt settlement company can be expensive, too. They charge various fees, and you can expect to pay 15 – 20% of your total debt trying to settle it. A company might also suggest you stop making monthly payments to your creditors while the negotiations take place, which can damage your credit score. This can be especially bad if your providers refuse the settlement in the end.