They Simplify Your Repayment
If you have debt across multiple credit cards, it can be tough to remember how much you owe and when your monthly payments are due.
With a personal loan, you dont have to keep up with multiple credit card payments, said Alia Dudum, a millennial money expert at LendingClub. Instead, you can combine all credit card balances into a single easy payment.
How Hard Is It To Pay Off Debt Fast
It isnt hard, it just isnt fun, which can make it hard for people. Its also hard to scale back on a lifestyle youre used to living. Most dont want to make the sacrifices necessary to pay off debt, let alone do it quickly. One of the biggest criticisms of my story back when it came out was that people assumed it was easy for me to pay off a large amount of debt because I was a single, childless woman making around $60,000 dollars a year.
Get Free Independent Debt Advice
There are many organisations and charities that offer free, impartial debt help and advice. Some advice may be face-to-face, some over the phone and some online.
If you can’t afford the repayments on existing debt, it’s better to get free independent advice rather than dipping further into financial trouble by using fee-charging debt-management companies.
Find out more:free debt advice contacts includes contact details for the major debt advice charities.
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Should You Use A 401 To Pay Off Debt
In some cases, it could be beneficial to cash out a portion of your 401 to pay off a loan with an 18% to 20% interest rate, says Paul Palazzo, CFP, COA, managing director of financial planning at Altfest Personal Wealth Management.
For debts with lower interest rates, such as a home mortgage or student loan, taking a 401 withdrawal, and paying both income taxes and a possible 10% penalty on it, would make little financial sense.
Thats especially true when you consider that youd be sacrificing $45,000 in retirement savings, plus their future earnings.
Fortunately, there are some alternatives.
Do A Budget And Reduce Your Outgoings
A household budget is a plan that summarises your earnings and spending habits, so you have a clear idea of where your cash is going and where you can make changes to reduce outgoings and boost the money you have to pay down your debt.
If you stick to it, a budget plan will help you make sure you dont fritter away more than you earn and potentially help you work your way out of debt.
Find out more: follow our step-by-step plan to working out an effective household budget.
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Improve Your Credit Score
We looked at how to check your credit report and score for free above. However, if you find your score is low then there are ways to improve it.
Check it for mistakes and get those rectified, registering to vote and ensuring your rental payments count are just a few of the ways you can easily improve your score.
Find out more: how to improve your credit score
How Consolidating Credit Cards Affects Your Credit
Unfortunately, theres no way to know exactly how consolidating credit card debt will affect your credit score. But here are some factors that are impacted by the decision.
Your credit utilization goes down
Your credit utilization is calculated by dividing each credit cards balance by its credit limit. Then, you do another calculation for all your cards combined.
For example, lets say you have three credit cards:
- Card A: $1,000 balance, $4,000 credit limit
- Card B: $3,000 balance, $6,000 credit limit
- Card C: $500 balance, $750 credit limit
Heres what your credit utilization would be for each card:
- Card A: 25%
To get your overall utilization, you combine the three cards:
$4,500 / $10,750 = 41.86%
The higher your credit utilization, the more it hurts your credit, so paying off a credit card with a high utilization will improve your score. Keep in mind, however, that if you consolidate your credit card debt and then rack up more, the additional debt could damage your credit score.
Your total debt owed stays the same
How much you owe is the second-biggest factor in your FICO credit score. Although youre taking out a new loan, youre not adding new debt because youre using the loan to pay off existing debt. As a result, this amount shouldnt be impacted.
Your credit report will take a hard inquiry
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Will Paying A Charge Off Improve My Credit Score
Clearing the balance related to your charge-off, unfortunately, wont do much for your credit score. Nor should you expect the entry to get deleted from your credit reports.
Why should you pay it off? Well, if you need a loan in the future and the lender decides to underwrite manually, having the charge-off listed as paid versus unpaid is more beneficial to you.
It confirms that you made things right and eventually cleared your debts.
Are You Eligible For Tax Credits
Tax credits are state benefits that provide extra money to people responsible for children, disabled workers and other workers on lower incomes.
There are two types of tax credits child tax credits and working tax credits.
Tax credits are tax-free and you don’t have to be paying National Insurance or tax to qualify, but they are means-tested. So, whether you qualify and how much you get depends on your household’s income and circumstances.
Find out more: read our full guide to tax credits to find out if you qualify and how much you could get.
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How To Avoid Debt Relief Scams
Some debt relief companies offer to help you negotiate with your creditors and get on a better payment plan or settle for less than you owe.
Debt relief or settlement companies often claim that they can work with your creditors to reduce the amount of money you owe, but that doesnt necessarily mean your loan will settle, said Dudum. Your loan can actually continue to accumulate interest or penalties until its paid off.
Thats because these companies sometimes encourage you to stop making your credit card payments. Unless youre able to settle all or most of your debt with the company, the buildup of charges and fees could wipe out any savings on the settled debt, Dudum added.
In some cases, these companies are out to scam you or charge you fees to do things you can do on your own for free.
As a result, we recommend avoiding debt relief companies. Instead, consider applying for a personal loan you can use to consolidate your debt. Banks, credit unions, and online lenders offer these loans, and many of them dont charge any fees to process the loan for you.
Get A Better Paying Job
I knew the only way to get rid of my debt for good AND get on my feet in a new city was to get a job. And not a Starbucks-retail-so-you-can-audition job, a real job, with a decent salary and benefits. If the debt is crushing you and youre living paycheck-to-paycheck, you may want to double-check and make sure your salary is where it should be.
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Check If You Are Eligible For Benefits
You might be entitled to government benefits without being aware of ti. Even if youre working and dont have health issues or children there are benefits potentially available to you.
You might be eligible for universal credit, which is a relatively new government benefit, replacing six existing benefits: housing benefit, income-related employment and support allowance, income-based jobseekers allowance, child tax credit, working tax credit and income support.
The best way to get an idea of how much you may be able to claim is to use a free and comprehensive calculator.
Find out more: independent benefits organisation EntitledTo offers a useful and free calculator so you can work out what you may be eligible for.
What Should You Consider When Picking A New Credit Card
You’ll probably find lots of offers for special low introductory rates and no annual fee. What could be better than “low” and “no,” right? Before you decide, you’ll need to know:
- how long the introductory period lasts
- what the interest rate will be after it ends
- whether there are any balance transfer fees
- whether any new purchases will change your interest rate
I Set A New Money Goal
My hours were still reduced, so I continued receiving assistance from the CARES Act. That meant I still had a surplus of cash coming in. So I decided that building up an emergency fund was a good next step in my financial wellness journey. I didnt have a specific savings goal in mind, so I put all the extra money after rent, utilities, and other needs into savings.
Also, because of my salary, I received a $1,200 stimulus check in May. But because of my saving strategy and unemployment income, I never had to use it. By July 15, I stocked away $5,500 into my emergency fund.
Separate Debts And Savings To Avoid Them Setting Off
If you have debt and savings with the same provider then it has the right to set-off and use money held in your current or savings account to pay off debt such as a credit card or personal loan.
While its unlikely to happen, it can, especially if youre juggling your debt repayments, and would have a big impact on your personal cash flow.
The best way to avoid it is to move your savings to a different financial institution .
Find out more: use our free tool to check if your savings and debt are with the same financial institution .
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Ways To Pay Off Credit Card Debt Fast
This is a great time to get out of credit card debt. The economy is starting to work its way back to normalcy following the COVID-19 pandemic, and the average Americans personal savings rate has jumped to record levels.
Still, many people are stuck with high-interest credit card debt a burden that will only worsen when the Federal Reserve increases interest rates as early as next year.
In other words, the time to get to work whittling down that debt is now especially if you were able to save money over the course of the pandemic. Here are six smart strategies to help you out.
How Much Credit Card Interest Will You Pay
Ever feel like you’ll never pay off your credit cards? Can’t fathom how much interest you’re paying?
What if you could know exactly how much interest you’re paying, and when you’ll get to say goodbye to your credit card debt?
Thankfully, our Credit Card Interest Calculator will transform these uncertainties into knowledge you can use to formulate your debt reduction strategy.
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A Personal Loan Simplifies And Consolidates Your Debt
The average American has about 4 credit cards, each of which comes with its own terms, interest rate, and billing schedule. It can be hard to keep track of all of that. A personal loan enables you to consolidate all of those variables into a single place. Behavioral finance shows that the fewer decisions you have to make the more likely you are to save.
How Your Credit Score Affects Eligibility
Its true that if your credit score is low, you might not get approved for a loan, let alone one with a good interest rate.
look at your application, credit report, and other factors in order to estimate the likelihood that youll be able to pay back your loan, said Dudum. Lower credit risks will get an offer with a lower APR, and higher credit risks will receive an offer with a higher APR.
The good news is thats a hurdle you can eventually jump by improving your credit. For example:
- Check your credit score using a monitoring service, such as Discover Credit Scorecard or .
- Learn which factors are negatively impacting your credit score so you know where to focus.
- Tackle each factor in turn. For example, if you have late payments, start paying on time. If your credit utilization is high, start aggressively paying down your cards with higher balances. Whatever it is, work to turn your credit weaknesses into strengths.
- Check your credit report for errors or fraud and dispute any instances you find. You can get a free copy of each report once a year at AnnualCreditReport.com.
If your credit score is good but youre not sure youd qualify for a good rate, many personal loan companies allow you to check your rates without a hard credit check.
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How Much Interest Will You Pay
The amount of interest you pay is calculated based on your annual interest rate, balance, and how much you pay each month. Fortunately, this Credit Card Interest Calculator makes the math easy. Simply input the variables, click the Calculate Credit Card Interest button, and you’ll learn not only the total amount of interest you’ll pay, but also:
- The amount of your next payment that will be applied to principal
- The amount of your next payment that will be applied to interest
- The number of monthly payments until your balance reaches zero
- The number of years until your balance reaches zero
In addition, you can lower the overall amount of interest you’ll pay by negotiating a lower interest rate or increasing your payments. The more creative you get, the less you’ll pay!
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How Long Will It Take Me To Pay Off My Credit Card Bill
It is important to be aware of the interest rate that you’re paying on your credit card bill and the monthly interest charge for the credit you’re receiving. If your monthly repayments are too little, your bill may actually be rising month-on-month in interest alone.
To work out exactly how much time it will take to pay off your credit card bill, use our calculator above.
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How Credit Card Debt Can Hurt Your Finances
If you pay off your credit card balances every month, you dont need to consolidate your debt. But if you consistently carry a balance, it can threaten your financial well-being.
For example, 58% of the people we surveyed have had at least $6,000 on their credit cards for more than a year, and 43% have more than $15,000 in credit card debt.
High interest rates dont help, and almost half the people we surveyed are paying interest rates higher than the average, which the Federal Reserve pegs at 14.99%.
In some cases, you might be able to negotiate your interest rate, but credit card issuers arent always cooperative.
Combining high interest rates and high balances can be poison to your financial well-being. For example, lets say you have $15,000 in credit card debt with an APR of 14.99% and a minimum payment of $300.
Assuming you dont continue using your credit card and you make the minimum payment each month, it will take you more than six and a half years to pay off your debt. And youll spend $8,676 in interest along the way.
Automate Your Minimum Payments
To keep your credit card accounts in good standing, you want to make sure you at least pay the minimum amount due on your bills on time each month. This will help protect your as payment history is the most important factor in determining that important 3-digit number.
To make it easy, automate these payments so the money is taken out of your account every month on time and you don’t have to think about it.
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What Is A Charge
A charge-off is a term used to describe when an account is written off as fully uncollectible.
The lender decides to remove an account from their balance sheets to write off the debt for tax purposes.
A charge-off typically happens when a consumer has made no payment to the lender for 180 days or more. But this number is not set in stone some charge-offs happen as quickly as 120 days.
Its important to remember that a charge-off does not mean you are no longer responsible for the debt and that this event has no consequences.
The creditor simply needs to move forward and clear their accounts. Creditors can claim a charge-off for any form of credit loan, including credit card debt, personal loans, student loans, car loans, hospital bills, and so on.
They are likely to hire an agency to collect on their behalf or sell the debt to a collections agency to recoup a small fraction of their losses immediately.
Calculate How Long It Will Take To Pay Off Your Credit Card
Americans today owe more money than ever before. The fact that ‘interest never sleeps’ means that the situation will continue to worsen unless steps are taken at the individual level to reduce or eliminate debt. Additional monthly payments can make a difference to accelerate paying off your credit cards and save yourself hundreds and thousands in interest payments. Use our Credit Card Repayment Calculator to figure out when you can pay off your credit card.
An important part of personal finance is how you manage your debt. Ideally, you would not have any debt, but in practice, most families do. It is not likely that most persons would be able to buy a car, a house, an education, or even major appliances without having to incur some debt. Sometimes, debt may actually be desirable, especially if you could borrow money at a low interest rate to make a high-interest investment.
Debt makes everything cost more. If you saw a sign in a store window advertising “Sale — Everything 25% Off,” you might be tempted to rush in and buy, buy, buy. But what if the sign said “Sale — Everything 25% More Than Marked”? That is just what happens when you pay for goods and services using debt. Moreover, you may be using debt without even realizing it.
Americas Problem with Credit Card Debt
While some debt is okay, too much debt is not. So, how do you know whether you have too much debt or not? First let’s look at the different kinds of debt we might incur.
How to Conquer Credit Card Debt
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