Created in 8/2019

  First advice -

- Do not open/activate any more credit card accounts.



If you cannot afford it now, what makes you think you will be able to afford it later? 

  Now you are ready to start the journey.

  Unfortunately there is no easy way out of debt, credit card is no different. 

  I would first tally all of the credit card you have open, so you can have a clear view of what you are facing.  You should include interests from highest to lowest. 

  Once you have a clear view, paying the highest interest credit card first will be of paramount importance, you still should be paying minimum amount on all of your credit cards so as to not default.

Ways to pay your credit card other than paying off the balance-

1 - Debt Consolidation- 

Pretty much you get a consolidation loan, at the end you will end up with only one payment, making it easier to keep track and at times cheaper if the interest rate given is lower than the credit card interest rate.  (especially now in 2020 when the interest rates are the lowest)

Types of loan consolidation-

  - Personal Loan- this involves going to a bank and getting a loan at a lower rate than the credit card. 

  Pros -

    Single payment

    Lower rate (depends on bank and credit score)

  Cons - 

    Longer loan life (long time till pay off) this is of course unless you are laser focused and determined to pay off early. 

 2 - Retirement account loan AKA "401K loan"-

  I would not recommend this route, should you miss a payment or stop paying altogether your retirement account will be credited and you will end up without a secure retirement. 

3 - Balance transfer credit cards- 

  The way this works is you find a credit card with a lower  interest rate and transfer the balance from the old card to the new card, usually they will give you a time to pay it off, after this time period the interest rate will increase dramatically and you will be back where you started, maybe even worst. The only time a balance transfer will work is if you are laser focused and have a plan to pay it off in the specified time period. Word of caution- unforeseen economic circumstances can come up jeopardizing the payment. 

4- Home equity line or line of credits-

  This is another bad idea, you are taking a loan against the worth of your home. usually never ends well for you should you stop paying the loan, at the end you could lose your property. 

5- Debt settlement company-

One of the worst options, a company will settle with you and agree to pay the money for a fee. This is the worst option you can think of, RUN from this option. 

How can consolidating the debt affects my credit score?

In the beginning (first few years) the credit score may actually decrease, however in the long term while you make all of your payments the credit score will invariably rise. 

 These are a few pointers for managing credit card debt. The most important step is do not get back in debt. 

Till next time,