Do you owe money on one or more of your credit cards or instant cash loans? If so, you aren’t alone. Millions of Americans have credit card balances that they can’t pay off in one month; in fact, the average credit card balance is several thousand dollars.
Owing a large sum of money on your credit card puts you in a precarious financial position. You are vulnerable to the credit card companies who can raise your interest rate to 19.99% to 29.99% APR if you are late with a payment. Even if you pay on time, you likely are paying at a high interest rate, usually 13 to 19%.
One way to take charge of your finances is to transfer your credit card balance to a place where you can get a lower interest rate and more of your hard earned money can be applied to the principal rather than interest. Consider the following options:
1. An unsecured loan. Unsecured personal loans are available through most banks and will offer you two benefits over your current credit cards—a fixed interest rate that is usually several points lower than credit card interest rates, and a pay off date. Unsecured loans are typically available for 1 to 3 years. Take out one of these loans, and you know exactly when your debt will be paid off.
2. A secured loan. Another option, though riskier, is a secured loan. When you take out a secured loan, you put down something as collateral such as your car. Be careful though—if you fall behind in your payments, you could lose the item you put up for collateral through repossession.
3. Peer-to-peer lending. This is a relatively new option. Apply for peer-to-peer lending through a site like Lending Club or Prosper. Other people will give you money and “invest” in your loan; they make money as long as you pay on time, and in return, you get a loan with a lower interest rate than your credit cards. (The level of your interest rate depends on your credit score and credit history, among other things.)
4. Transfer your balance to a 0% APR card. While this is a good option, it is last because it is only a temporary solution. Many credit cards offer 0% APR for 12 months on balance transfers. The problem is that if your balance is large, you may not be able to pay it off within 12 months. Then you are right back where you were before, paying high credit card interest rates.
If you are sick of your credit card debt and want to make progress paying it off, consider switching your balance to another place so you can benefit from a lower interest rate and more money being applied to your principal.