How to Get out of High Credit Card Debt

/ 12:59 AM January 22, 2019

High credit card debt can be crushing, especially for a family with growing children and various expenses. It can sometimes feel as if the debt will never be paid off. But there are ways to find relief. The most common solution for credit card debt is a debt settlement company to handle multiple debts. It is a broad term that encompasses many options for debt relief and can help you gain some breathing room in your finances.

How Debt Consolidation Works

A debt consolidation loan is a method of relieving debt that basically merges several debts into one. This new consolidated debt would have lower fixed rates on a loan term. It is also much simpler to pay off one debt than many credit card companies. There are many options for debt consolidation, and they are not equal.

Different options will work best for different people with different goals. You need to match up your goals and situation with the option that will best serve them.

Options for Debt Consolidation

There are several options for debt consolidation that could work well for you. The most common are:

Take a personal loan

By obtaining a personal loan, you can merge your debts into one and pay a lower interest rate than with the credit card. You’ll need to make sure that you are actually getting a lower rate. Don’t just stick with your bank – shop around for different rates to ensure that you get the lowest rate.

Remember that any loan will come with fees and additional costs, so you’ll need to account for that.

You should also check on the requirements for the loan – if your credit card debt has impacted your credit score, you will need to address that before you can obtain a loan to consolidate the debt. On the plus side, you’ll have a lower interest rate than you did before and just one bill to pay.

Borrowing from your 401 k

Most employers provide 401(k) benefits for their employees. Sometimes, you can borrow from your balance, but not all plans will allow you to do this. If you are able to borrow money from your 401(k) plan, you usually have five years to repay it. It does have some downsides.

First, the plan is meant for your retirement years and should not be touched unless you need to. Second, if you leave that job before you pay the money back, it will be due right away.

Borrowing money from family or friends

Borrowing money from family or friends

Out of all the options on this list, this one should probably be saved as the very last resort. It may seem simple to ask those close to you for help, but money makes even the closest relationship much more complicated.

On the one hand, you may have very generous family members who want to help you and will offer a very low-interest rate. On the other hand, you could find yourself dealing with awkwardness, expectations, and even resentment. You could even find yourself in court if the unsecured debt goes unpaid.

This will make things very difficult and awkward for the rest of the family as well. It’s usually best to keep family and friends separated from financial matters.

Taking out a home equity loan

Your home has value, called equity, which could give you cash for various needs. You actually can use it for any need or desire, but if you save it until you need it and allow that value to build, then there will plenty for you to draw on when you are in desperate need of it.

You could obtain either a home equity loan or a home equity line of credit. Just make sure you have enough equity and remember that it’s still a loan, so you will need to consider the fees and costs of obtaining the loan.

And like any other loan, you’ll need to satisfy the requirements, such as a decent credit score and sufficient income.

Refinancing your home

Refinancing your home

Like a home equity loan, this allows your home to provide you with the funds you need. With a refinancing, you are transferring your mortgage to a new mortgage loan with a lower interest rate. This lower rate will likely be lower than both your current mortgage and credit card debt.

The benefits are twofold: your mortgage will become more manageable and you can take cash out to lower your credit card issuer debt. The interest is also tax-deductible. Again, you will need to satisfy requirements, like a good credit score and enough income.

You could put your home at risk if you default on payments, so make sure you are making enough and have enough savings to cover payments.

Transferring the balance from one card to another

This might seem counter-intuitive, but you would transferring the balance to a card with a lower interest rate.

This can help you get a handle on your debt, but if you choose the wrong card, you could end up worse off.

Make sure you read all fine print and know all the terms. Choose a card without an annual fee. If the lower rate is an introductory rate, try to pay off the balance before that rate expires and goes up.

Working with a credit counseling service

A credit counseling service helps people get a grip on different kinds of debts. For debt consolidation services, you pay the credit counselor a monthly payment and they pay your debts. You are basically replacing one monthly payment with another.

Make sure you research the company, though, as they have a reputation for having high fees and harming your credit report.

Debt Consolidation

Debt Consolidation Isn’t For Everyone

All of these methods require minimum payments. If you are unable to make these, debt consolidation may not be the right path for you. You might want to consider other methods of debt relief, such as debt negotiation, also known as debt settlement.


Debt consolidation can help you eliminate high credit card debt. It gives you one monthly payment instead of several, reduces your interest rate, and can help you improve your credit score. There are many ways of implementing debt consolidation, but not all of them will be right for you.

Choose the one that best suits your needs and spending habits, remembers the goal is to be debt-free and save money.

Published January 22, 2019; Updated July 31, 2019.

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