Options to consolidating credit cards
But before you say, “sign me up,” get to know the different methods of debt consolidation, and how they may — or may not — help you with your financial and credit goals.The idea behind a consolidation loan is to borrow enough to cover the balances on your credit cards.The repayment time frame is between three to five years.Many credit card issuers reduce interest rates for consumers on the plan (and some waive them entirely).A home equity loan allows you to borrow a lump sum with a fixed interest rate, and a home equity line of credit (HELOC) — where you draw against the equity whenever you need it — has a variable interest rate, so the rate can increase over time.The interest rates on both types are significantly lower (around 7%, as per U. Bank’s calculator for a ,000 loan or HELOC) than those of credit cards, which are averaging APRs of 17%.When you’re juggling multiple credit cards, managing them all like a pro while paying down the balances can be a major challenge.
With a balance transfer credit card, you can move existing credit card balances to a new credit card account.
There is usually a small monthly administration fee.
You would be required to close the accounts and agree to not open more while the plan is in effect.
Among the top deals now: Discover it® Balance Transfer, Wells Fargo Platinum Visa card, and the Chase Freedom Unlimited®, all of which come with a 0% intro APR for at least 15 months.
If you’re a homeowner and have accumulated equity in the property, you can take out a loan or a line of credit and use it to pay off your credit card debt.
This is best for people who are in a stable financial position.