And you could wind up in a worse situation if you’re not careful.For example, if you took out a loan to pay down your credit cards, only to wind up maxing out your cards again, you’d end up with both a loan and credit card debt to pay off. Huettner says there’s no “silver bullet” to consolidating credit card debt because “each option is always relative to the others, and they all depend on each person’s financial picture.” However, you may want to start with the options that don’t require you to take on a new secured debt or threaten otherwise protected money.Also, you can usually only borrow up to 50 percent of your account balance (up to ,000), and you must pay back the money within five years unless you’re using it to buy a home that will be your principal residence. Eric Klein, an attorney with the Klein Law Group in South Florida recommends, “Never, ever use your qualified money (401(k), IRA, pension, etc.) to consolidate credit card debt.” In addition to the reasons above, he explains that your qualified money could be protected from creditors if it’s in a retirement account.You may be able to take money out of your home or vehicle by using a cash-out refinance or a HELOC.Also, the mortgage interest payments can typically be a tax write-off (up to a certain amount).Cons: You may need good credit to qualify for a low interest rate.Credit Karma's favorite balance transfer cards Pros: If you transfer and repay the debt during the promotional period, you could avoid paying interest entirely.
Credit card debt can have a relatively high interest rate compared to other types of debt.With a loan from a qualified plan, such as a qualified 401(k), you may avoid paying an early withdrawal penalty in a few different circumstances.Cons: You lower your retirement savings, and you may have to pay income taxes and an early withdrawal penalty if you’re younger than 59 ½.Cons: There may be a small fee to get set up as well as a monthly service fee.Also, “some of these companies will require that you close your credit cards once you pay them off,” says Maggie Germano, founder of a financial coaching service in Washington, D. Closing accounts isn’t always bad, but it could hurt your credit.Look for a National Foundation for Credit Counseling (NFCC) accredited organization if you’re considering this route.