Buried in Christmas debt? Seek to consolidate your debts
NEW YORK — So maybe you shouldn’t have bought that 55-inch TV for your little one or given your corgi a diamond-encrusted necklace for Christmas.
Now you’re saddled with thousands of dollars in holiday credit card debt, collecting interest at 18% or more.
Fear not, there are several ways to pay off that credit card debt in a less expensive way.
ZERO INTEREST, WITH A TAKE
Many credit card companies are offering interest-free balance transfers to new and existing customers after the holidays. This way, you can pay off the debt without incurring interest, usually with a grace period of 12 to 18 months. But if the balance is not repaid within this period, the remaining amount is again subject to high credit card interest.
Beware, however, of balance transfer fees. A typical credit card issuer will charge around 3% to transfer a balance. Some credit cards offer free promotional balance transfers, such as JPMorgan Chase’s Slate.
TAKE A PERSONAL LOAN
Several online lenders now offer low-interest debt consolidation loans to eligible borrowers, such as SoFi, Marcus of Goldman Sachs, Lending Club and Prosper.
Most online lenders can offer loans as low as 7%. But since these are unsecured loans, borrowing from these companies may have similar or higher interest rates than credit cards. Loans have the advantage of consolidating your payments in one place, with a regular payment and a three to five year plan to pay off that debt.
With the housing market largely recovered from the crisis, banks are more likely than ever to offer home equity lines of credit. The interest rate on a home equity line of credit can be as low as 3%. However, they are effectively a second mortgage on your home and should only be used for large, unforeseen expenses.
DON’T REPEAT YOUR MISTAKES
If you are consolidating your debts, the most important thing is to stop using your credit cards. Then you will be struggling with the debt consolidation loan and the new balances on the cards.