Average Credit Card Debt
The average credit card debt is actually around $2,200. This is still a lot of money when you consider that the average income is $48,600, but it’s not a dire figure.
However, only 45% of Americans have credit card debt. 23% of Americans don’t even have credit cards. The remaining 32% pay their credit cards in full every month. 8.3% owe more than $9,000 on their credit cards.
If you carry a balance on your credit cards, you can become one of the 32% who doesn’t. Although it seems challenging with rising fuel and food prices, resolving to cut back on your spending can make a real difference in your ability to pay debt without truly restricting your enjoyment of life.
Types of Debt Consolidation
Credit Card Transfers
This is basically paying off your credit card debt by transferring the balance to one credit card. It can be an effective way to lower the interest rate that you are paying. However, there can be difficulties with transferring your balances - including extra charges. Plus, you should be sure that the interest rate that you are transferring to is not a temporary promotional rate.
Home Equity Loans
By working with your bank, you can borrow money against the equity of your house. You should get a pretty low interest rate these days. Be careful, if you default on paying back this loan, you could lose your home. Be sure to know how your home should be valued and watch out for extra fees.
Retirement Fund
If you have a 401K plan, you can usually borrow money from it (with a reasonable interest rate - and the interest is actually being paid back into your 401K account). Worth considering if you're young and you really need the cash. However, it's dangerous to borrow against retirement savings.
Life Insurance
If you have a cash life insurance policy, you might be able to take out a loan against it. The repayment interest will typically be lower than commercial rates. Again, be careful when considering this option. Remember why you have life insurance in the first place - so that your dependents will be able to get by if you pass away. If you take money out of the policy, your dependents will receive less if you die pre-maturely.
Credit Counseling
This could turn out to be a great move , take immediate steps to reduce and consider debt consolidation and bankruptcy if necessary. Click on the link above to learn more about how this process works.
Debt Consolidation Loan
Your bank or an independent company can provide a consolidating loan to you. They may also be able to talk to your creditors and get the amount owed reduced. Be careful that you're comfortable with their tactics. Some debt consolidators will tell you to ignore creditors until they give up. They might give up trying to collect but they will severely damage your credit report. Always check businesses with the Better Business Bureau and ask to speak with some former clients. There is a decent amount of fraud reported in this industry.
