Many people are afraid of debts since it is believed that it can drag you down for a long period and even give you sleepless nights. But, various reasons will lead to some people in spiraling debts.
You may have settled an emergency need using your credit card. But, regardless of the reason, defaulting on your credit card debt is a sure way to get into snowballing debts. This may be the case for those who have maxed out their credit card limit.
The good news is that there are several ways for you to deal with such a dilemma. Ignoring your lender’s calls and your bills is not part of the tips.
Here are 5 ways to help you get out of credit card debt.
Annual Zero Percent Interest Balance Transfer
Most banks in Singapore to offer this option of a balance transfer. A balance transfer may be used to repay credit card debts with zero or a low-interest rate loan. When you hold unmanageable credit card debt with a money lender or bank. You could consider applying for a credit card with another lender. This new credit card can then be used to repay your older credit card debts.
Normally balance transfers come with 0 % rates of interest for the first 6 months. This gives borrowers some grace period to look for more ways to settle the debt. Make sure that you only use your new credit card after you have repaid your debt. In so doing you will avoid accumulating new debts. The balance transfer process could take 3 weeks or more to take effect.
If you can, it is better to repay the whole loan amount in full soonest possible. But then, when the cash to do this is not enough to pay off the bill, you could choose to at least pay the minimum amount.
By paying the minimum amount you will be able to avoid incurring late payment fees however the interest costs will still apply. Borrowers need to be aware that most credit cards attract a minimum repayment of 3% or $50 of the unpaid loan. Thus it may be a good idea to inquire from your moneylender about it.
Although making the minimum repayment can be helpful, it will only serve as a short-term solution. Thus avoid making this a habit or you might soon find yourself knee-deep in debt.
Also, when you are only able to pay the minimum amount on your outstanding credit card debt. Then you should avoid using the card. This will help you avoid piling more debt to the already existing bill. With this in mind avoid using the credit card as you work towards repaying the loan balance.
Another good option for you is by utilizing personal loans. Some personal loans come with lower interests than credit cards. Therefore, you could consider using personal loans to settle your credit card debt. These kinds of personal loans may be obtained from privately licensed moneylenders.
Since personal loans are normally multi-purpose, it then means that they may be used for various uses such as purchasing stuff to settling other debts.
Even though personal loans come with fixed repayment plans, you can still repay it at much earlier. But first, confirm whether you will incur a prepayment penalty. This will help you know whether you can repay the loan before the loan set tenure and at no extra charges.
Pay In Full
Certainly, the best solution to deal with any debt is to repay the existing balance in full. Sadly there are a few people who see credit cards as free cash thus they will keep swiping the card until they attain the credit limit. From that point, they only will pay the required minimum payment.
Keep in mind that although banks will boast of having low required payments for the set due dates. They do so as a way to offer an assurance to borrowers that they will not get charged the late payment fees. Though the interest rate charges still stand.
Just remember that even when there are no late payment charges, provided that you do not repay the loan balance. A borrower will still get high-interest rates charges for their loan. Thus settle the due loan amount to avoid incurring the interest rate charges. It is best to opt for this solution when your monthly salary is still adequate to repay the debt.
For those borrowers who have several credit card debts, then it may be a good idea for them to consider getting the debt consolidation scheme.
Different from the balance transfer that will require that you obtain a new credit card. The debt consolidation plan may be done in different ways. Some banks will offer the debt consolidation scheme even when you do not hold a new credit card. However, you will need to hold a savings account something that moneylenders offer to their borrowers.
Choosing the debt consolidation plan it means that the financial institution you choose will repay the outstanding debts on your multiple credit cards. This leaves you with a single loan that has a single interest. This makes making on-time loan repayments easy since you are keeping track of only one loan.
This repayment option is best to be used when your card debts have reached 12 times your monthly salary.
What To Do Once You Have Repaid Your Credit Card Debts
When you hold several credit card debts, you could start by coming up with a plan on ways to repay them. Soon after you have repaid those debts up to the last dime, you will need to be careful not to get into a similar situation in the future.
When you want to make any important purchases or are facing an emergency situation. You could consider getting a personal loan to help you manage. The personal loans offered by licensed moneylenders attract lower rates of interest that set at a 4% cap.