Deep in debt? Personal finance experts offer some solutions.

If you're drowning in credit card debt, there are a number of potential solutions - Photo by UnSplash +

There’s no reason to keep paying 20% credit card interest

The rise in inflation since 2022 has pushed millions of Americans deeper into debt. According to recent surveys, nearly two-thirds of Americans say they typically live paycheck-to-paycheck. With two years of inflation, it stands to reason many households have gone into debt just to keep up.

Now that inflation appears to have stalled, it may be a good time to look for some debt solutions and ways to reduce that burdensome debt load. Credit card debt is especially toxic, with an average interest rate now above 20%.

Are there better alternatives? Shmuel Shayowitz, the president and chief lending officer at Approved Funding, says homeowners might consider a home equity line of credit (HELOC) because their rates are much lower than credit card rates.

“With the recent surge of home appreciation, the availability to access home equity puts owners in a great position to secure financing at a lower cost of funds compared to credit cards and most auto loans,” he said.

ConsumerAffairs has analyzed 31 HELOC lenders here.

Debt consolidation

Erika Kullberg is an attorney and personal finance expert. She says debt consolidation, combining several debts into one loan, can be a good move if you can obtain a competitive interest rate.

“This can allow you to make just one payment each month to a single creditor and could actually result in paying less overall,” Kullbert told ConsumerAffairs. If you are able to obtain a consolidation loan with a fixed interest rate, you will have the assurance of knowing exactly what you need to pay and when.”

ConsumerAffairs has analyzed 31 debt consolidation lenders here.

Daniel Cohen, founding partner of Consumer Attorneys, specializes in debt management. He says transferring high-interest credit card debt to a card with an introductory period of 0% interest can put a big dent in your debt, but he says it’s not a long-term strategy.

Potential drawbacks

“So, if you don’t foresee being in a better financial situation after 18 to 24 months, when the offer expires, it may not be the best option, Cohen said. “Perpetually using balance transfers to stay afloat is not a long-term solution and will eventually damage your credit.”

Kullberg says a personal loan might also be a good option, since personal loan rates are significantly lower than credit cards.

“A personal loan tends to have a fixed interest rate, and thus, fixed payments, as well as a set repayment term rather than an indefinite one, telling you exactly when you’ll have a clean slate,” she said.

ConsumerAffairs has analyzed 24 personal loan lenders here.

Kullberg also said working with a credit counseling agency or making a debt repayment plan, can help you analyze the situation and decide which debts to tackle first, and give you a systematic way to do it.

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