I just saved almost $600 in debt servicing costs…Here’s how.By
The interest paid on outstanding debt is costly, especially for credit cards (ranging from 11% to as high as 20%) if you carry a monthly balance. That’s why it’s important to shift your debt load to lower interest loans and / or pay off your high interest loans first (or better yet, try to avoid carrying a balance at all).
This week I did just that. I used a low-interest line of credit to pay off a 16.99% credit card. If I maintain the same monthly payments that I was making on the credit card, I will save about $570 in interest over the repayment period of about 20 months. (In actuality, however, I will likely reduce my payments on the line of credit and shift that money to paying off my two remaining higher interest credit cards.)
Shifting high interest debt to low-interest debt can be done in a few ways:
1) Apply for a line of credit (which often carries an 7-9% interest rate) and use that to pay off higher interest loans and credit cards.
2) Apply for a debt consolidation loan. This is a loan intended specifically for the paying off existing higher interest debt and consolidating it into a single loan. Like lines of credit, interest on a debt consolidation loan can range from 7-10%. Unlike lines of credit, debt consolidation loans carry a set repayment schedule and often require the borrower to close existing credit cards (i.e., close the account and cut up the card) once they are paid off.
You should always consult a qualified financial services account manager or financial advisor to make sure you choose the option that is right for your specific circumstances.
I would love to hear your success stories around consolidating debt and / or shifting debt to lower interest credit facilities. Please leave a comment below. Your ideas will make a difference in the financial lives of other readers.
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