Burdened with credit card debt during lockdown? Here is how to get rid of it
During these times many people will find themselves deep down in different types of debt, significantly in credit card debt. Even though credit cards are a great addition in everyone’s wallet, they work only if used wisely. However, most people think credit cards to be spare money and then use it recklessly and get stuck in debt.
Getting stuck in a credit card debt spiral not only ruins one’s budget but also eats into all of their future income until it’s cleared. Hence, credit cardholders should understand that and avoid extensive use of their cards.
Having said that, if you are also stuck in credit card debt, there are multiple ways to get rid of those dues.
Here is how you can get rid of your credit card debt:
Balance Transfer
With the credit card balance transfer facility, you can shift the outstanding money to a lower-cost EMI repayment option. Therefore, to ease credit card dues, the balance transfer method is an ideal option for cardholders. With this method, the cardholder will be able to shift from one card to another. However, it is not limited to that, one can also shift multiple card dues to one card. Experts suggest shifting the dues gives the cardholder a fresh credit-free period. This way he/she has more time to repay the amount without adding further interest on the amount.
Personal Loan
Opting for a personal loan to pay the money, could be another option for the cardholder. Even though this is not generally advised, but when deep down in credit card debt, one can explore various options. Note that, credit card overdue attracts a high-interest rate of up to 36 to 40 per cent per annum. A personal loan, on the other hand, attracts interest ranging from 11 to 24 per cent per annum.
Top-up Loans
One can opt for a top-up loan, with an existing home loan. For people regular with their home loan for more than 2 years successfully, they can easily get top-up loan approval. The lender conducts due diligence on the property, after application, and then the top-up loan is approved. This can be used to pay off credit card debt. Keep in mind that there is no tax benefit linked with top-up loans.
Snowball Method
With the snowball method, you can pay off your credit card dues steadily one after the other. The snowball method eases the repayment burden. Additionally, according to experts, one should opt to clear off smaller dues first with this method. As clearing balance from a single card will help cardholders improve not only their credit score but also the credit utilization ratio.
Liquidate Investments
As credit card debt attracts around 36-40 per cent interest, liquidating investments could be an option to consider. This is because the interest from investments even at the best will hardly yield half of that rate. Hence, breaking FDs or other low earning investments could be an option to pay off the credit card debt. Experts suggest this option should be considered only in rare cases as the cardholder will not be left with any savings for an emergency.