One of the most difficult things to deal with is credit card debt.
Let’s face it, when you have a lot of credit card debt it feels like a huge weight on your shoulders that pulls you down. I’ve been there. I know what it feels like when your paycheck comes in and a good portion goes back out in credit card payments that barely put a dent in your total credit card debt.
When you have a lot of credit card debt, getting rid of it is hard because you dealing with high interest rates. A good portion of your payment every month goes toward interest, rather than reducing your principal.
This problem is compounded when you have multiple credit cards with high balances. You are paying different interest amounts on different cards, and it can really slow your progress.
In some cases, you can help your situation with a debt consolidation loan, in which a larger loan is used to pay off several smaller loans. The problem is that it is hard to find an unsecured loan that will pay off all of your credit card debt if you go to a more traditional bank. Banks have been real tight with credit and they aren’t quick to give out a loan to pay off another debt without there being something to secure your loan.
A balance transfer to another credit card could be an option but only if your credit is good enough to get a low interest rate and a credit limit large enough for the transfer. Besides, if you’re still working on building good credit card habits then opening a new credit card may not be a great idea.
So what can you do to help pay off credit card debt?
Instead of relying on a more traditional bank, or putting your home at risk through a secured home equity loan, it’s possible to see if you qualify for an unsecured loan through P2P lending.
What is P2P Lending?
Person to person (or P2P) lending allows you to get loans from ordinary people to help you consolidate your debt.
Web sites like Lending Club and Prosper offer you the chance to receive an unsecured loan that you can use to pay off your credit cards. Other consumers lend you the money,as an investment, in $25 increments. With the power of several people working on your behalf to provide a loan, you can get enough money to pay off your credit cards.
You still need to repay the debt, though.
However, instead of making several payments at a very high rate of interest to several credit card issuers, you make one payment — often with a lower interest rate — to the P2P lender. The lender then goes about dividing up your payments amongst those who have loaned you money.
There are additional fees that go to the lender, and you will pay interest, but overall it’s possible to save in the long term.
Will You Receive the Funds You Need?
It’s important to note, though, that P2P lending is an all or nothing proposition.
If you have high credit card debt, it might be hard to round up the funds you need. And, if not enough people decide to fund your loan, you won’t receive any money at all. This means that you should consider what you can do to make your loan look like an attractive investment for consumer lenders.
Some of the things you can do to make your P2P loan request more attractive to investors include:
- Share why you want the money to pay off your credit cards – tell your story
- Describe the actions you are taking to get on the right financial track
- Show that you can handle the payments, and that you will be responsible
- Be specific about what you plan to do with the money.
P2P loan sites do have minimum credit score requirements, so if you have very bad credit, you might not qualify for a loan from one of these sites. It’s worth your while to check your credit score first and if it’s not so great then take some time to work on improving your score.
However, if your credit is fair, you should have a shot at getting the loan you need.
Person to person (P2P) loans are becoming increasingly popular because they are easier to get than an unsecured bank loan, and you can usually borrow up to $25,000 or $35,000. There is also a growing population of people who are looking for places to invest their money for a decent rate.
This provides you with the funds you need to consolidate your debt, and pay it off that much quicker.