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While in situations when you are not having cash in hand a credit card is a great tool and so is it when you are earning rewards but a lot of time the interest rate you’ll pay is very high.
Ideally, you should never carry a balance, so you don’t waste a fortune on interest charges.
While paying your balance in full each month is always the best course of action, but it isn’t possible for everyone, they get stuck with huge credit card debt.
When so much of your monthly payment goes toward high-interest charges it becomes difficult in paying down that debt.
You have few options to reduce the cost of borrowing one is with a balance transfer credit card and another option is with a personal loan.
Keep reading to learn more about each option.
A Balance Transfer
You can reduce the interest rate on your credit card debt if you can qualify for a balance transfer credit card.
A balance transfer is an offer from a credit card company, that gives you a special promotional rate if you agree to transfer your debt to their card.
The balance transfer offers usually comes with a 0% rate but they last for a limited time, of 12 or 15 months.
If you qualify for a balance transfer card, then you will be able to reduce your interest rate to 0%. Though you might have to pay an upfront fee of about 3% – 4% to transfer your balance.
But when you do the math it will be a lot less than the amount of interest you would end up paying if you didn’t transfer your debt.
But if you can’t pay off the transferred balance before the promotional rate expires then you’ll be right back to a higher credit card interest rate.
This still may be a good option, because you get time to save money on interest and pay down your principal balance each month.
A Personal Loan
Another way to tackle your credit card’s interest rate is through a personal loan. Compared to the credit cards interest rate personal loan rates are quite low.
You can apply for a personal loan, and if you qualify and are offered a competitive interest rate, you can take out the loan and use the proceeds to pay off your credit card.
Unlike a balance transfer, A personal loan isn’t going to give you a rate of 0% as the balance transfer, but you’ll have a fixed interest rate so your monthly payment and total interest costs wouldn’t change over time.
A personal loan can help you to predict exactly what you’ll pay and when you’ll be free of your debt.
Both a personal loan and a balance transfer could help you reduce your interest rate.
Look into what interest rates you qualify for as well as determine your timeline for paying your balance off.
Reference Source: Yahoo News
