4 Ways To Use Credit To Help You Get Out Of Debt
Getting out of high-interest debt is a goal for many Americans. But most people find that it can be a lot harder than it sounds. If you struggle with this challenge, there may be solutions that you haven't considered...and some of these solutions involve using your own credit. How?
Here are 4 debt-busting methods that feature wise use of other credit options:
Signature or personal loans are closed-end loans that involve the borrowing of a set amount of money and paying it back with set payments over a set period of time. There are many advantages to using personal loans to consolidate and destroy revolving debts.
First, they often come with a much better interest rate than credit cards. Second, you don't rack up the debt again because personal loans generally only involve the original debt load...not additional credit lines. Third, you can use them to consolidate several other debts into one, usually lower, manageable payment.
If you have good credit, chances are that you will receive offers to consolidate high-interest debt into a low interest—or no interest—special offer. These offers usually come with a fee for transferring the debt and a limited time frame for payoff. So, be sure you can meet the terms and that it's cost-effective. But if all of your payment is going toward the principal, you can get out of debt much faster.
Home Equity Loans
Home equity loans are somewhat similar to personal loans but carry a little more risk. If you own a house, you may be able to borrow against the equity (the difference between what you owe and what your home is worth). Home equity loans usually come with good interest rates and manageable payment terms. The downside is that you do put your home at some risk since it becomes collateral.
If you're having trouble managing credit card debt but still have a good credit score, you may be able to get a lower interest rate from your credit card company. Look at some of the other credit card interest rate offers you're getting and then ask your own credit card company to reduce your rate to something comparable. There's a lot of competition for your business, and customer service representatives often have leeway to change rates.
Which method works best for you depends on your personal circumstances. But by trying one or more of these tips for using your credit to make your debt more manageable, you can move toward a more financially secure future.