There are several options for debt consolidation. Depending on what your situation is, one way is better for you than the other. A lot will depend on your financial situation, how much you are willing to change, and your credit score.
Friends and Family Can Help with Debt Consolidation
Friends, family, and money do not always go well together. There are enough cautionary tales of families that formed permanent riffs over money to scare anyone away from doing this. Before deciding to take this path, make a clear repayment plan.
If you are considering how to consolidate credit card debt without hurting your credit, working with your loved ones is better. There are no minimum eligibility requirements or loan terms. If you fall behind on a payment, it is not reported to a credit bureau. However, the only way that borrowing money from friends and family can work is to pay the loan at the time and in the manner that was agreed on.
Should You Get a Personal Loan for Your Debt?
According to the experts at SoFi, “Not only do you avoid dealing with creditors and settlement agencies but using a personal loan to pay off your credit cards can potentially lead to a better credit score in the long run.” There are other benefits. Your credit score improves as long as you make your payments on time. You avoid the messy situation of dealing with the settlement agency.
There is something calming when you just need to make a single payment on your debt instead of paying several credit card companies each month. However, you will only get a loan from a financial institution if your credit is in good standing. Thankfully, if your credit is good enough to get a loan, you will likely be able to borrow the money at a lower interest rate than what your credit card offers.
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Credit Card Balance Transfer
You might get a credit card offer in the mail with a zero percent APR for 18 months. It has a high enough balance to transfer your high-interest credit cards over to it. Is this a good idea?
It could be. What you are doing is using one credit card to pay for the other. Before doing the balance transfer, think about if this will save you money long-term. Think about balance transfer fees and the length of the promotion.
For a credit card balance transfer to work in your favor, you need financial discipline. Because you may transfer your old balances to the zero percent card, you might be tempted to use your “empty” credit cards. This can lead to a world of credit issues.
Getting out of debt is hard. Even if you have a terrific financial strategy, it is not something that will happen overnight. However, it can be encouraging to know that getting out of debt is possible. Other people have done it, and so can you.