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Getting the best rate: Paying off debt by lowering interest rates

If you're ready to pay down your debts, you may be starting to look into different methods. One is to transfer your balances from your credit cards onto one with a lower interest rate. Another option would be to take out a personal loan, pay off the debts, and then pay down the loan with monthly payments.

Before you decide on which one of these options is right for you, there are a few things to consider. For instance, you'll first want to look at the interest rates you have open to you. If your credit cards are currently at 15 percent, transferring to a card at 5 percent would save you a lot of money over time. It's best if you can find a 0 percent card offer, which may be possible if you are approached and asked to transfer your balance. Compare your personal loan and credit transfer options and keep the one with the lowest interest rate at the top of your list.

You will also want to see if the credit transfer has a fee. Sometimes, you could be hit with a fee of $100 or more; generally, it's between 3 and 5 percent of the amount you want to transfer. This could still be a better option than a personal loan, though, particularly if it has a high interest rate over the course of the year while the credit transfer has a 0 percent interest rate.

The goal when you transfer is to pay the least amount in interest as possible. If this still doesn't get your debt under control, then that's when you can start looking into legal options like bankruptcy or credit counseling.

Source: Bankrate.com, "Balance transfer credit card vs. personal loan," Mike Cetera, July 26, 2016

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