The average American has $5,700 in credit card debt, so if you’re struggling with high card balances, you’re not alone. Knowing how to get out from under this debt load can be challenging, though — especially with high interest rates adding to your balance every month.
Fortunately, there are a variety of ways to pay down credit card debt. You can do some of it on your own, and other strategies require you to seek help from a lender or a company that focuses on helping people like you.
Are you ready to get free from credit card debt? Let’s dive in.
Create a Repayment Strategy Yourself
The easiest way to handle credit card debt is to set up a repayment strategy that fits your lifestyle. One of the most common is to focus on your smallest debts first. As they are paid off, you put your payments toward larger debts.
Over time you create momentum and end up with more money to put toward larger balances. If you can handle your minimum payments and still have a little bit of cash left over, this could be a great way to pay down debt.
Consolidate Your Debt
One of the biggest problems with credit card debt is that the interest rates are very high. The average credit card interest rate is between 14% – 18%. If you have a low credit score, it could be even higher.
This interest is added to your balance every month, making it very difficult to get out of debt. Fortunately, interest rates on other types of loans are much lower. As a result, you can get a consolidation loan and use the money to pay off your credit cards. Then, you pay a single monthly payment at a much lower rate.
This can help you reduce the amount you owe each month even as you pay down your debt balances. Just be sure to remove the credit cards from your wallet so you don’t build the balances back up.
Get Better Credit Cards
Perhaps the credit cards you have now have fees or extremely high interest, but you qualify for better offers than you used to. If that’s the case, you can apply for new credit card accounts and transfer the balance.
If you have good credit, you may find that balance transfers have 0% interest for a year or more. This can give you time to make payments and get rid of that debt without having the balance grow.
You may also choose to have a single credit card you use and pay off each month. If you do, you might enjoy having one that gives you cashback, travel points, or other perks. Shop around to find the best deal!
Home Equity Loans
If you have owned your home for a while, you’ve probably built up equity. Equity is the value of the house that you own versus the amount you owe the bank. For instance, if your home is worth $200,000 and you owe $150,000 on it, you have $50,000 in equity.
You may be able to take out a line of credit based on the $50,000 in equity. However, it’s best not to borrow more than you need because you have to pay the money back, and you don’t want to risk losing your home if something goes wrong.
Another idea is to refinance your home entirely. This would give you a new loan of $200,000, you’d pay off $150,000 to the old lender, and you’d have $50,000 in the bank. Of course, there are fees when you refinance, but it can be a big win overall if you can lock in a lower interest rate.
If you’re struggling with credit card debt and none of the other options work, you might decide to work with a debt settlement company. These companies will work with your creditors on your behalf to reduce your debt.
Debt settlement companies charge a fee for their services, but it’s worked into the monthly payment for your plan. Settling debt in this way does impact your credit score, but you can build it back up over time.
If you’re at the end of your rope, debt settlement is often a better option than outright bankruptcy. You can settle your entire balance much more quickly than you ever could making minimum payments.
Make 2021 Different
Take advantage of these strategies to pay down your credit card debt. You’ll feel freer with less debt to manage, and your