Consolidating credit card debt into personal loan
These cards allow you to transfer the balance from all your credit cards and pay them off with no interest for an introductory period ranging from 6-24 months.To qualify, you will need an excellent credit score (740 or higher) for the best deals (18-24 months at 0% interest) and at least a 680 or higher score to qualify for any of the rest (6-18 months at 0% interest).Unsecured loans are those backed only by the borrower's promise to repay.If you want to go the unsecured loan route, add online lenders to the list of possibilities.Essentially, this loan allows you to pay credit card debts in full. However, if you have a low credit score or dings in your credit report, you may not be approved for consolidation loan.Rates for consolidation loans in February of 2019 ranged from 6% to as high as 36%, so even if you are approved, your rate may be so high that it doesn’t make sense when compared to what you currently pay.They restructure the debt, hopefully in a more favorable way for the consumer, but you still end up paying back what you owe.
These loans carry a fixed interest rate, with monthly installments, and usually last from 2-5 years, depending on the amount borrowed.
In February of 2019, the interest rate on home equity loans was around 5.5% (even less in some places) while the average interest rate on credit cards was 17.5%.
If you owed ,000 on credit cards and tried to pay them off with a home equity loan in five years at 5.5%, your monthly payment would be 6.52 and you would have paid a total of ,191 in interest.
The plus side of getting a consolidation loan from a family member or friend is that they are not competing with another lender so they can set the interest rate however low (or high) they want. Whatever the terms, it should be a win/win agreement that serves both sides.
It should spell out the obligations in simple terms and, most importantly, it should be written down in case things get dicey.