can be easy to accumulate. And, once you have enough of it, that debt can be quite uncomfortable. After all, , and those rates have been climbing in recent months.
"There are many factors that contribute to today's higher credit card interest rates," Brian Martin, wealth manager at Merit Financial Advisors, says. "We know that the Federal Reserve has been steadily raising the short-term fed funds rate over the last two years to slow the economy and get inflation under control," and as a result, "interest rates as a whole have risen across the board."
But what options do you have if you're tired of paying high interest on your credit card debt?
How to pay less interest on your credit card debt
High-interest credit card debt has been an issue for countless Americans over the years, so it makes sense that, including the three listed below:
Utilize a debt consolidation loan
are personal loans designed for the purpose of consolidating multiple high-interest debts into one loan. These loans typically come with a lower interest rate than credit cards, and offer one fixed payment, making it easier to juggle and creating a clear path to payoff.
However, not all debt consolidation loans are equal.
"Do some shopping," says Patrick Yono, founder of Sure Life Financial. "Don't just depend on one lender to find a personal loan. Go online and examine the offered interest rate and terms from various lenders. I would recommend examining a minimum of three lenders and asking each one to go over the fine print with you. This will help you make a more educated decision."
Debt consolidation loan pros
- One payment replaces multiple payments.
- Debt consolidation loans typically come with competitive interest rates compared to credit cards.
- The fixed nature of debt consolidation payments could result in a faster loan payoff compared to credit cards.
Debt consolidation loan cons
- The best interest rates are typically reserved for well-qualified borrowers.
- Debt consolidation loans help you streamline debt, but do not address how you got into debt or how to avoid it in the future. And, you can keep your credit cards open after you've paid them off with the loan, which could lead to new credit card debt down the road.
- You may have to pay loan origination fees.
Sign up for a debt consolidation program
If you don't have a strong enoughor financial situation to qualify for a debt consolidation loan, it may benefit you to consider signing up for a debt consolidation program. Under these programs, debt relief experts negotiate your interest rates and a payoff plan directly with your lenders. You then send the debt relief company a fixed monthly payment that is dispersed to your creditors on your behalf.
Debt consolidation program pros
- Experts use your financial hardship details to negotiate significant reductions in your interest rates.
- A fixed payment plan means you'll pay your debts off far faster than you are likely to on your own.
- You'll have debt experts to turn to if you have questions.
Debt consolidation program cons
- Debt consolidation experts use your financial hardship information to negotiate lower rates. This often leads to account closures and could have a negative impact on your credit score.
- If you're facing significant financial strain, debt consolidation programs may not provide enough relief.
- If your credit cards are closed, you may need to find other financial options to fall back on if needed.
Take advantage of a debt settlement program
programs don't just help you pay less interest. They work to negotiate the total amount of money you owe to your creditors. Here's how the process works:
- You agree on a payment plan with the debt settlement company.
- You stop paying your lenders and send your payments to the debt settlement company.
- The debt settlement company stores your payments in a special-purpose savings account.
- Once you have enough money saved to settle your debts, your debt settlement company negotiates a settlement for you.
Debt settlement program pros
- Debt settlement may reduce the amount of debt you owe.
- You could end up with a significantly lower minimum payment.
- Debt settlement could help you get out of debt faster than you would by making just the minimum credit card payments.
Debt settlement cons
- No payments are made to your lenders as you save for your settlement, which could lead to a creditor lawsuit.
- Creditors aren't required to accept your settlement offer.
- Debt settlement usually has a detrimental impact on credit scores.
The bottom line
If high credit card interest rates are getting you down and you think you have no way out, think again. You may not have to deal with high interest rates forever. You could cut the credit card interest charges and potentially pay off your debts faster with one of the debt relief options mentioned above. Just make sure to do your homework before making a decision to ensure the route you take is the right one for your finances.
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