Making minimum payments on your credit cards every month will keep you in good standing, but it’s a slow and painful way to get out of debt. You’ll want to put extra money on at least one card each month. There are two methods for doing this.
Snowball Method: Make your minimum payments on all credit cards and put the extra on the card with the smallest balance.
Avalanche Method: Similar to the snowball method, but you put any extra money you have on the card with the highest interest rate.
There are benefits and drawbacks to each of these. With the snowball method, you’ll quickly have fewer credit card bills, but the remaining balances will be high. With avalanche, you’re eliminating the highest interest debt, but you’ll still have multiple bills every month.
The objective with either of these is to pay more than the minimum payment due on at least one credit card. With most credit cards, minimum payments mostly cover interest, taking very little off the principle. Using one of these techniques will get you out of debt faster.
Many credit card issuers offer zero percent interest on balance transfers for an introductory period. Other cards regularly offer low rates. Do some research into the interest rates on your cards and check out any offers for new credit cards.
There’s usually an opportunity to get better rates with a balance transfer, thus lowering your monthly payments and giving you a chance to accelerate debt repayment. Some institutions, like Chase and Barclays, offer lower interest rates if you switch to another card they offer.
Debt Consolidation Loans with Better Interest Rates
Interest rates on unsecured personal loans are typically lower than credit card interest rates. If you take out a loan to pay off all credit card balances, you’ll save money on interest payments, and you can stretch out payments over several years if you need to.
The only way that this strategy will be effective for you is if you stop using your credit cards after you consolidate them into one payment. Those balances will go to zero. That doesn’t mean you should start spending again. Pay what you owe on the loan first.
Before you apply for these loans, you should take the actions needed to increase your approval odds. If your credit score is low due to your current credit card debt, you could be declined for a debt consolidation loan. If you are approved, the interest rates and fees might be more expensive than the loan is worth and could lead you further into debt. Instead of applying for the loan and taking another hit to your credit report, you could first enroll in a credit repair program to improve your credit score. Once you've raised your score, you can apply for a loan with higher approval odds and favorable terms.
Seek Help from A Professional
Debt settlement is a good option when you start to go underwater from credit card payments you struggle to make each month. If that’s where you’re at right now, there’s nothing to be ashamed of. Many Americans are in the same boat.
Taking the first steps on your journey to better credit could feel scary and overwhelming. No one wants to deal with debt, but taking action to get yourself out can help you feel more in control. If you need help negotiating credit repair or settlement options, contact us here at Credit Helpers. Our team has experience disputing credit report errors, dealing with credit bureaus, and can help you achieve your goals to improve your credit. We want you to get out of debt and stay out of debt.