The world of millennials in the 21st century of financials has two words that are both a boon and bane - credit cards. But you can’t just blame the lifestyle and economic situation, because there is always a chance for an emergency. When it comes to credit cards, it is either that they have taken too many or they have managed to steer clear of it all. So for those who are stuck with more than one and are in credit card debt, here is a smart way to pull off a one-shot settlement of your debt with a top-up loan.
Let us tell you in detail on how credit card debt consolidation can help you keep your financials on a smarter lane.
First of all, make a list of all your cards, their balance statements, credit limits, interest rates along with current outstandings and minimum monthly due for each card. This will help plan out how much you need to pay off each month and how to keep your spending in check so you don’t end up piled up in debt. This list helps you narrow down your payment options and dates, be it the traditional way of making small snowball payments each month or taking a top-up loan to pay it off in one shot.
Remember one thing at all times- don’t let the idea of consolidated debt payment on your credit card make you overspend. Control your usage by either setting a limit on the card or by cutting down on your cards. The whole idea of consolidated settlement is to ensure you don’t lose your credit card and don’t botch up your credit score.
A quick tip: whenever you use credit cards, try to keep your balance below 30% of your total credit limit. Maintaining a low balance will reduce your credit utilization ratio, which happens to be the second most important factor in calculating your credit score post-payment. Keeping yourself away from sizable debt is the best way to not put a strain on your finances and move from a debt settlement calendar to an investment calendar.
The advantage you have with personal loans is the interest rates, which stand somewhere between 10-18% annually, while the average credit card’s interest rate stands at 41%.
This eases up your financial stress where you get down to one monthly payment, lower interest rates, and freedom from huge debts.
So once you have your list ready, the next thing to do is to look for options of balance transfers. Credit cards do come with their own perks but the question begins to lurk when you have more than one in sizable debt. Hence the option of balance transfers, where you get to move your balance to a low-interest rate card from a higher one. Generally, banks allow 0.99% of the monthly interest(~11.9% annually) to be transferred, while you still have to pay the minimum charges of your card.
There isn’t much option apart from a personal loan that can help you settle a credit card debt. Balance transfer credit cards only allow you to move the credit with 0% APR (Annual Percentage Rate) for a short period of time. So when your loan gets sanctioned, you should plan your debt clearance in a systematic manner, while keeping your CIBIL Score intact.
Once sorted out, you can get started by paying off your old cards, the ones that have accumulated interests over time. When you are done paying them off with a top-up loan that is specially taken in these cases, put your card away or block it to ensure you don’t end up overspending again.
Emergencies are unpredictable, and such are times when you need to take a personal loan or worst case, rely on your credit card. To ensure that they are available for such times is to ensure that you pay their debts off. In such cases, you can always avail a personal loan to settle your credit card debt.
One good option that you can consider for a personal loan is Bajaj Finserv Personal Loan, available on Finserv MARKETS. Personalized pre-approved offers, instant approvals, quick disbursal and flexible tenures of 12 to 60 months are features that make it stand out. It is an online loan product for the online generation. Your entire process right from application to disbursal can be completed within minutes. You can access your loan from anywhere, 24x7. What’s more, it’s a zer0-collateral loan!
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