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Three Steps for Consolidating Credit Card debt for the new year
Advertiser disclosure You're our first priority. Every time. We believe that everyone should be able make financial decisions with confidence. While our website doesn't include every financial or company product on the market, we're proud of the advice we offer and the information we offer and the tools we develop are impartial, independent easy to use and completely free. So how do we make money? Our partners compensate us. This could influence the types of products we write about (and where those products appear on our site) however it in no way affects our recommendations or advice, which are grounded in thousands of hours of study. Our partners are not able to be paid to ensure positive review of their services or products. .
3 Steps to Consolidate Credit Card debt for the new year
Consolidation of debts combines several debts into one monthly payment that has lower interest rates and may help you pay off credit card debt in the coming year.
By Jackie Veling Lead Writer Buy now, pay later loans as well as debt consolidation private loans Jackie Veling manages the personal loans for NerdWallet. Her work has been featured by The Associated Press, MarketWatch, MSN, Nasdaq.com and Yahoo Finance. Before that, she ran an editing and writing freelance company, in which she collaborated with a range of clients, including U.S. Bank and Under Armour. The graduate of Indiana University with a bachelor's degree in journalism.
Jan 18 2023
Edited by Kim Lowe Lead Assigning Editor The consumer lending Kim Lowe leads the personal loans editorial team. She joined NerdWallet after 15 years managing content for MSN.com which included food, health, and travel. Kim began her career as a writer for magazines that covered the mortgage, supermarket and restaurant industries. Kim earned a bachelor's degree in journalism at the University of Iowa and a Master of Business Administration from the University of Washington.
A majority of the items featured on this page come from our partners who pay us. This affects the products we feature and where and how the product appears on a page. But, it doesn't influence our opinions. Our views are our own. Here's a list of and .
The beginning of a new year is a time for resolutions and you may be especially focused on gaining control of your financial situation. For many, this means cutting down on high-interest credit card debt.
Credit card balances increased by 15 percent in the 3rd quarter of 2022 compared to the same period in 2021, the largest increase in 20 years according to the Federal Reserve's most recent credit and debt report for households. Although delinquencies are still at historic lows, are increasing. In addition, due to increased rate of interest, carrying a balance is more expensive, making it easier to go deeper into debt.
There's a solution that can help. Debt consolidation, the process that rolls multiple debts into a single monthly payment at a lower rate of interest is a life raft for those who can't get out of debt by making minimum payments on their own.
Follow these steps to consolidating your credit card debt during the year ahead.
1. Select the right consolidation tool for your score on credit and your debts
Two of the most effective tools to consolidate credit card debt include a balance-transfer credit card or debt consolidation loan. Both are based on rolling your existing debts into one single payment.
When you use a balance-transfer credit card, you move higher-interest account balances on credit cards to it and then settle the balance at a lower rate. Additionally, many balance-transfer cards come with an initial promotional period of 0%, usually lasting between 15 and 21 months, in which you don't pay interest and you'll be able to pay off debt faster.
Balance transfer cards may charge a transfer fee -usually between 3% and 5% of the total transferred value. They are only accessible to those with good credit (690 credit score or better).
A is a personal loan that is available to borrowers from all over the credit spectrum through online lenders, banks as well as credit unions. When you take this loan in order to repay credit cards, you'll be left with one monthly installment that is fixed over the life of the loan generally between two and seven years. Additionally, personal loans tend to lower interest prices than credit cards which means you'll still save on interest.
Tiffany Grant, an accredited financial counselor based in Greensboro, North Carolina, states she doesn't have any strong preference among the options, however she advises clients to look into credit scores.
"Because these products function in the same way, it's more about what you'll get approved for," Grant says. "Some individuals aren't able to qualify for the 0% interest rate card, and therefore require a lower-percent personal loan."
The ability to plug your balances as well as interest rates into a can aid in your decision-making as it can reveal the magnitude of your debt. For example, a balance-transfer card can be a great fit only if you qualify for a high enough credit limit to pay off the debt and pay it off during the promotional period.
If the difference in interest rates between the consolidation tool and your existing debt is small -- consider about a few percentage points, it might be better to forgo consolidation and not risk the hit to your credit score from applying for a new credit product Grant suggests Grant. If you're in that situation, think about alternatives .
2. Apply with a lender and get approved
After you've selected the consolidation tool you want to use, it's time to apply.
Applications for balance-transfer cards and debt consolidation loans can be found online. You may be required to provide your personal details, such as your Social Security number, address and contact details, as well as earnings and employment details.
If you're looking to apply an interest-free debt consolidation loan it is possible that you will be able to apply for pre-qualification this allows you to view the potential loan conditions without affecting the credit rating. If you're not able to pre-qualify take note of the eligibility criteria on the lender's website, such as an acceptable credit score.
In evaluating your application, lenders examine your credit history for on-time repayments, an acceptable utilization ratio and minimal inquiries about credit, says Sarah DuBois, a spokesperson of Wells Fargo, which offers the balance transfer card as well as a consolidation loan.
You can also take action to increase your chances of getting approved according to DuBois, like making a loan payment on an existing balance, which lowers your credit utilization or resolving an error of your credit score.
Once you have been approved, the next steps will differ based on the product. For example, for an account with a balance transfer feature, you can initiate the transfer of your existing debts either online or by calling your new issuer. The transfer could take anywhere from a few days to a couple of weeks.
In the case of a consolidation loan, you may get the money in your bank account that you can use to repay any credit or debit cards. Other lenders can transfer the funds directly to your creditors.
Want you to combine your credit card payments? See if you pre-qualify
Answer a few simple questions to get personalized results from our lending partners.
The loan amount
on NerdWallet
3. Make sure you pay your bills on time and create a strategy to stay out of the cycle of
Though consolidation can be an effective strategy but it's only effective when you settle the debt you've taken on and avoid the temptation to accumulate an unpaid amount on your newly-freed cards.
that prioritizes your new monthly installment so that you don't get charged a late fee. In the event of a late payment, it can affect your credit score when reported to credit bureaus.
Also, think about how you'll stay from being in debt in the near future. Grant says most of her clients aren't in trouble because of bad spending habits, however, they're in debt because they can't afford unplanned expenses, like car repairs or medical bills.
Grant suggests putting aside an emergency fund of $1,000 to prevent a cash shortage. And don't wait till you're free of debt before you start, she says because unexpected expenses could pop up anytime, causing you to slide backwards.
Instead, put aside any cash you can manage into savings accounts that earn interest while still making your new monthly installment.
"Maybe it will take a little longer but you'll be able to do both and in most situations it's best," Grant says.
Author bio Jackie Veling covers personal loans for NerdWallet.
On a similar note...
Dive even deeper in Personal Loans
Learn more about smart money strategies - straight to your inbox
Join us and we'll send you Nerdy content on the topics in finance which matter to you the most along with other ways to help you make more from your money.
If you loved this information and you would love to receive more info with regards to weekend $255 payday loans online same day (banksrstg.site) generously visit our own page.
Advertiser disclosure You're our first priority. Every time. We believe that everyone should be able make financial decisions with confidence. While our website doesn't include every financial or company product on the market, we're proud of the advice we offer and the information we offer and the tools we develop are impartial, independent easy to use and completely free. So how do we make money? Our partners compensate us. This could influence the types of products we write about (and where those products appear on our site) however it in no way affects our recommendations or advice, which are grounded in thousands of hours of study. Our partners are not able to be paid to ensure positive review of their services or products. .
3 Steps to Consolidate Credit Card debt for the new year
Consolidation of debts combines several debts into one monthly payment that has lower interest rates and may help you pay off credit card debt in the coming year.
By Jackie Veling Lead Writer Buy now, pay later loans as well as debt consolidation private loans Jackie Veling manages the personal loans for NerdWallet. Her work has been featured by The Associated Press, MarketWatch, MSN, Nasdaq.com and Yahoo Finance. Before that, she ran an editing and writing freelance company, in which she collaborated with a range of clients, including U.S. Bank and Under Armour. The graduate of Indiana University with a bachelor's degree in journalism.
Jan 18 2023
Edited by Kim Lowe Lead Assigning Editor The consumer lending Kim Lowe leads the personal loans editorial team. She joined NerdWallet after 15 years managing content for MSN.com which included food, health, and travel. Kim began her career as a writer for magazines that covered the mortgage, supermarket and restaurant industries. Kim earned a bachelor's degree in journalism at the University of Iowa and a Master of Business Administration from the University of Washington.
A majority of the items featured on this page come from our partners who pay us. This affects the products we feature and where and how the product appears on a page. But, it doesn't influence our opinions. Our views are our own. Here's a list of and .
The beginning of a new year is a time for resolutions and you may be especially focused on gaining control of your financial situation. For many, this means cutting down on high-interest credit card debt.
Credit card balances increased by 15 percent in the 3rd quarter of 2022 compared to the same period in 2021, the largest increase in 20 years according to the Federal Reserve's most recent credit and debt report for households. Although delinquencies are still at historic lows, are increasing. In addition, due to increased rate of interest, carrying a balance is more expensive, making it easier to go deeper into debt.
There's a solution that can help. Debt consolidation, the process that rolls multiple debts into a single monthly payment at a lower rate of interest is a life raft for those who can't get out of debt by making minimum payments on their own.
Follow these steps to consolidating your credit card debt during the year ahead.
1. Select the right consolidation tool for your score on credit and your debts
Two of the most effective tools to consolidate credit card debt include a balance-transfer credit card or debt consolidation loan. Both are based on rolling your existing debts into one single payment.
When you use a balance-transfer credit card, you move higher-interest account balances on credit cards to it and then settle the balance at a lower rate. Additionally, many balance-transfer cards come with an initial promotional period of 0%, usually lasting between 15 and 21 months, in which you don't pay interest and you'll be able to pay off debt faster.
Balance transfer cards may charge a transfer fee -usually between 3% and 5% of the total transferred value. They are only accessible to those with good credit (690 credit score or better).
A is a personal loan that is available to borrowers from all over the credit spectrum through online lenders, banks as well as credit unions. When you take this loan in order to repay credit cards, you'll be left with one monthly installment that is fixed over the life of the loan generally between two and seven years. Additionally, personal loans tend to lower interest prices than credit cards which means you'll still save on interest.
Tiffany Grant, an accredited financial counselor based in Greensboro, North Carolina, states she doesn't have any strong preference among the options, however she advises clients to look into credit scores.
"Because these products function in the same way, it's more about what you'll get approved for," Grant says. "Some individuals aren't able to qualify for the 0% interest rate card, and therefore require a lower-percent personal loan."
The ability to plug your balances as well as interest rates into a can aid in your decision-making as it can reveal the magnitude of your debt. For example, a balance-transfer card can be a great fit only if you qualify for a high enough credit limit to pay off the debt and pay it off during the promotional period.
If the difference in interest rates between the consolidation tool and your existing debt is small -- consider about a few percentage points, it might be better to forgo consolidation and not risk the hit to your credit score from applying for a new credit product Grant suggests Grant. If you're in that situation, think about alternatives .
2. Apply with a lender and get approved
After you've selected the consolidation tool you want to use, it's time to apply.
Applications for balance-transfer cards and debt consolidation loans can be found online. You may be required to provide your personal details, such as your Social Security number, address and contact details, as well as earnings and employment details.
If you're looking to apply an interest-free debt consolidation loan it is possible that you will be able to apply for pre-qualification this allows you to view the potential loan conditions without affecting the credit rating. If you're not able to pre-qualify take note of the eligibility criteria on the lender's website, such as an acceptable credit score.
In evaluating your application, lenders examine your credit history for on-time repayments, an acceptable utilization ratio and minimal inquiries about credit, says Sarah DuBois, a spokesperson of Wells Fargo, which offers the balance transfer card as well as a consolidation loan.
You can also take action to increase your chances of getting approved according to DuBois, like making a loan payment on an existing balance, which lowers your credit utilization or resolving an error of your credit score.
Once you have been approved, the next steps will differ based on the product. For example, for an account with a balance transfer feature, you can initiate the transfer of your existing debts either online or by calling your new issuer. The transfer could take anywhere from a few days to a couple of weeks.
In the case of a consolidation loan, you may get the money in your bank account that you can use to repay any credit or debit cards. Other lenders can transfer the funds directly to your creditors.
Want you to combine your credit card payments? See if you pre-qualify
Answer a few simple questions to get personalized results from our lending partners.
The loan amount
on NerdWallet
3. Make sure you pay your bills on time and create a strategy to stay out of the cycle of
Though consolidation can be an effective strategy but it's only effective when you settle the debt you've taken on and avoid the temptation to accumulate an unpaid amount on your newly-freed cards.
that prioritizes your new monthly installment so that you don't get charged a late fee. In the event of a late payment, it can affect your credit score when reported to credit bureaus.
Also, think about how you'll stay from being in debt in the near future. Grant says most of her clients aren't in trouble because of bad spending habits, however, they're in debt because they can't afford unplanned expenses, like car repairs or medical bills.
Grant suggests putting aside an emergency fund of $1,000 to prevent a cash shortage. And don't wait till you're free of debt before you start, she says because unexpected expenses could pop up anytime, causing you to slide backwards.
Instead, put aside any cash you can manage into savings accounts that earn interest while still making your new monthly installment.
"Maybe it will take a little longer but you'll be able to do both and in most situations it's best," Grant says.
Author bio Jackie Veling covers personal loans for NerdWallet.
On a similar note...
Dive even deeper in Personal Loans
Learn more about smart money strategies - straight to your inbox
Join us and we'll send you Nerdy content on the topics in finance which matter to you the most along with other ways to help you make more from your money.
If you loved this information and you would love to receive more info with regards to weekend $255 payday loans online same day (banksrstg.site) generously visit our own page.
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