What credit cardholders don't understand is that extensive use of their credit card can result in a debt spiral that will not only ruin their budget but also eat into all of their future income, until it's cleared.
Many people find themselves, deep down in significant credit card debt, quite early on in their lives. Credit cards are a great addition in everyone’s wallet but only if it is used wisely. Experts say most people think this to be spare money and then spend it recklessly.
What credit cardholders don’t understand is that extensive use of their credit card can result in a debt spiral that will not only ruin their budget but also eat into all of their future income, until it’s cleared.
However, there are multiple ways to get rid of credit card dues. If you are also in credit card debt, here are some strategies to stay out of debt:
Balance transfer: You can use the credit card balance transfer facility and shift the outstanding money to a lower-cost equated monthly installment repayment. Experts suggest to ease credit card dues, cardholders can use the balance transfer method.
With this method, you can not only shift from one card to another, but you can also shift multiple card dues to one card. Firstly shifting gives the cardholder a fresh credit-free period of up to 90 days, giving him/her more time to repay the amount without adding further interest on the amount.
Personal Loan: Cardholders can take a personal loan to pay the money, however, this is not generally advised usually. But when deep down in credit card debt, one can explore the option of opting for a personal loan.
Overdue of credit cards attracts high-interest rate which usually goes up to 36 to 40 per cent per annum or even more. A personal loan, on the other hand, comes at a much lower rate of interest ranging from 11 to 24 per cent per annum.
Snowball: This is another way to pay off your credit card loan. The snowball method helps the cardholder payoff the dues steadily one after the other, and hence, eases the repayment burden. Experts suggest cardholders can also opt to clear off smaller dues first with this method because even clearing balance from a single card can help them improve not only their credit score but also the credit utilization ratio.
Liquidate investments: This is something to seriously consider. A credit card debt attracts around 36-40 per cent interest, however, interest from investments even at the best will hardly yield half of that rate. Hence, it is suggested to break FDs or other low earning investments to pay off the credit card debt. Note that, this can not be done on a regular basis. Breaking investments should be looked at only in rare cases or else you will not be left with any savings for an emergency.
Top-up Loans: Other than a personal loan, cardholders can also go for a top-up loan. This can be opted along with an existing home loan. Hence, if you have been regular with your home loan for more than 2 years successfully, you can easily get top-up loan approval.
After application, the lender conducts due diligence on the property and then your top-up loan is approved, which you can use to pay off your credit card debt. Even though the rate of interest is close to the rate of interest of the home loan, note that there is no tax benefit linked with it.