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Debt Consolidation – 5 Need-to-Know Tips

Credit card debt consolidation options include balance transfer credit cards and debt consolidation loans among other options.

What is credit card debt consolidation?

Credit card debt consolidation is a strategy that takes multiple credit card balances and combines them into one monthly payment. Ideally, the new debt has a lower annual percentage rate than the rates on your credit cards, reducing interest costs, making payments more manageable, or shortening the payoff period.

The best way to consolidate your credit card debt depends on how much debt you have, your credit score and history, whether you have home equity or investments in a 401(k) account, and your self-discipline. Consolidation works best when your ultimate goal is to pay off debt.

The five most effective ways to pay off credit card debt are:

  • Refinance with a balance transfer credit card
  • Consolidate with a personal loan
  • Tap home equity
  • Consider 401(k) savings
  • Start a debt management plan

1. Credit card refinance

Pros:

0% introductory APR period.

Cons:

It requires good to excellent credit to qualify.

It usually carries a balance transfer fee and may have an annual fee.

Higher APR kicks in after 12 to 18 months.

Also called credit card refinancing, this option transfers credit card debt to a balance transfer credit card that charges no interest for a promotional period, often 12 to 18 months. You’ll need good to excellent credit (690 or higher on the FICO scale) to qualify for most balance transfer cards.

2. Credit card debt consolidation loan

Pros:

A fixed interest rate and monthly payment mean your payments won’t change.

Low APRs for good to excellent credit.

Direct payment to creditors at online lenders.

Cons:

Harder to get a low rate with bad credit.

Online loans may carry an origination fee.

Credit unions require members to apply.

You can use an unsecured personal loan from a credit union, online lender or bank to consolidate credit card or other types of debt. The loan should give you a lower APR on your debt or help you pay it off faster.

3. Home equity loan or line of credit

Pros:

Lower interest rates than unsecured personal loans.

May not require good credit to qualify.

Long repayment period, which keeps payments lower.

Cons:

You need equity in your home to qualify and a home appraisal is required.

Secured with your home, which you can lose if you default.

If you’re a homeowner, you may be able to take out a loan or line of credit on the equity in your home and use it to pay off your credit cards or other debts.

4. 401(k) loan

Pros:

Lower interest rates than unsecured loans.

No impact on your credit score.

Cons:

It can reduce your retirement fund.

Heavy penalty and fees if you can’t repay.

If you lose or leave your job, the loan is due in 60 days.

If you have an employer-sponsored retirement account like a 401(k) plan, it’s not advisable to take a loan from it, since doing so can have a significant impact on your retirement. Consider it only after you’ve ruled out balance transfer cards and other types of loans.

5. Debt management plan

Pros: 

Fixed monthly payments.

May cut your interest rate by half.

Cons:

Startup fees and monthly fees are common.

It may take three to five years to repay your debt.

Debt management plans roll several debts into one monthly payment at a reduced interest rate. It works best for those struggling to pay off credit card debt, but who don’t qualify for other options because of a low credit score. Learn more at https://en.wikipedia.org/wiki/Debt_consolidation

This article was brought to you by TFC Title Loans, we try to bring to you the most informative information. If you are interested in getting a title loan locally for you, we are able to help you with our large referral network.

We will help you to get the most money by using the equity that you have in your vehicle, the application is fast and we can provide you with same-day funding.

All of our referral partners are in compliance with the CFPB. We will help you to get the money that you need but from a trusted and reliable title lender.

Disclosures

DISCLAIMER: As our policy to make sure you know what we do and what are our limitations, we offer you these disclaimers. We are NOT A LENDER and we do not make short term cash loans or credit decisions. We are a referral service and work only with licensed lenders/brokers.

We may act as the broker for the loan and may not be the direct lender. Loan proceeds are intended primarily for personal, family and household purposes. We do not offer or service student loans.

*Loan amounts by the lenders vary based on your vehicle and your ability to repay the loan.

*Since we do not lend money directly we cannot offer you a solicitation for a loan, except in the state of California. In all other serviced states we WILL match you with a lender based on the information you provide on this website. We will not charge you for this service and our service is not available in all states. States that are serviced by this Web Site may change from time to time and without notice. Personal Unsecured Loans and Auto Title Loans are not available in all states and all areas.

*Auto Title Loan companies typically do not have pre-payment penalties, but we cannot guarantee that every lender meets this standard. Small Business Loans typically do have pre-payment penalties and occasionally will use your car as collateral to secure the loan.

*All lenders are responsible for their own interest rates and payment terms. TFC Title Loans has no control over these rates or payments. Use of the work competitive or reasonable does not mean affordable and borrowers should use their own discretion when working directly with the lender.

*The amount of people who applied for a loan and we helped and those who received a loan is not the same. We cannot guarantee we will find a lender who will fund you.Just because you give us information on this web site, in no way do we guarantee you will be approved for a car title loan or any other type of loan. Not all lenders can provide loan amounts you may see on this web site because loan amounts are limited by state law and/or the lender. Some lenders may require you to use a GPS locator device on your car, active all the time. They may or may not pay for this or charge you for this. This is up to the lender and we have no control over this policy of the lender. Typically larger loans or higher risk loans use a GPS.

*In some circumstances faxing may be required. Use of your cell phone to receive updates is optional.

*Car Title Loans are expensive and you may have other ways to get funding that is less expensive. These types of loans are meant to provide you with short term financing to solve immediate cash needs and should not be considered a long term solution. Residents of some states may not be eligible for a loan. Rejections for loans are not disclosed to our firm and you may want to contact the lender directly.

*Car Title Loan lenders are usually licensed by the State in which you reside. You should consult directly with these regulatory agencies to make sure your lender is licensed and in compliance. These agencies are there to protect you and we advise making sure any lender you receive money from is fully licensed.

*Trading Financial Credit, LLC dba TFC Title Loans, Car Title Loans California, Dineromax. If you are using a screen reader and are having problems using this website, please give us a call at 1-844-242-3543 for immediate assistance.

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