Debt has a way of sneaking up on you. Just when you think you have everything in order, you realize that your finances are under pressure and changes are necessary. While there are many ways to get back on track, debt consolidation is one of your best options.
There are many ways to consolidate your debt, with a credit card or personal loan among the most common. As you compare the pros and cons of both these options, you’ll come to realize which one best suits you, your debt load, and your goals.
Balance Transfer Credit Card
A balance transfer credit card allows you to consolidate balances from multiple credit cards. For example, if you have three credit cards with a balance of $20,000 combined, you can use a balance transfer to house it all in the same account.
This allows you to manage one credit card — instead of three — while also saving money on interest. That’s particularly true if you secure a balance transfer credit card with a zero percent introductory rate.
A personal loan can be used for many things, including debt consolidation. The nice thing about this option is the flexibility. You can consolidate almost any type of debt with a personal loan.
For instance, if you have credit card debt and a home equity loan, you can use a personal loan to consolidate the two. Just the same as a balance transfer credit card, you benefit from fewer loans to manage and interest savings.
Which One is Best for You?
The only way to know which option is best for you is to make sense of your financial circumstances. Here are five questions you can answer to help you make a decision:
- What type of debt do you have? Credit card only or multiple types?
- Do you qualify for a balance transfer credit card? What about a personal loan?
- How high of a credit limit can you secure? How much of a personal loan do you qualify for?
With answers to these questions, it’ll become more clear as to the best path forward. And in some cases, you may realize that it makes sense to use both a credit card and a personal loan to consolidate debt.
It’s a big change to your finances, but consolidating some or all of your debt can pay off in the long run. If nothing else, consider the pros and cons of both options so you can make an informed and confident decision.