Want to reduce your debt as you're paying for it? Money Girl has the trick to getting out of debt quickly, and for less!
A podcast listener named Jenna asks:
"I’m paying high interest rates on balances that I owe on 2 credit cards. I plan to pay them off as soon as I can, but it may take some time. What are my options for consolidating them so I can pay less interest and save money in the meantime?"
If you can’t pay off your credit card debt, the next best option is to “optimize” it—or shift it to a lower-interest account. That doesn’t make your debt disappear, but it can save you a bundle in interest. Then you can use the savings to pay down your debt even faster.
Consider these 3 options:
Option #1: Use a Balance Transfer Credit Card
When you transfer an existing loan or credit card balance to a new card with a lower interest rate, you can save a lot of money.
The Discover® More Card gives you 0% APR for 15 months on balance transfers and new purchases. After that you’re offered a rate from 10.99% to 20.99% based on your credit rating. There is a 3% balance transfer fee—so do the math to make sure it’s worthwhile.
For instance, if you have a $3,000 of debt on a credit card that charges 26%, you’re paying $780 in annual interest. If you pay the balance transfer fee of 3% or $90 on the Discover® More Card, you’d save $690 ($780 - $90) in just the first 12 months.
Option #2: Get a Personal Loan
You can use a personal loan to pay off your credit cards and consolidate the debt into one lower-interest loan payment. Many local banks and credit unions offer affordable loans, even if you don’t have excellent credit.
Option #3: Get a Peer-to-Peer Loan
Peer-to-peer or social lending started in 2006 and is growing in popularity for both borrowers and investors. It’s an online platform where you can get an unsecured personal loan through a network of lenders for debt consolidation or any other purpose.
Erase Debt photo courtesy of Shutterstock