OPM: Other people’s money. In the real estate world, this is a common way of doing business. You use the least possible amount of your own money to buy a property and borrow the rest. This use allows the investor to receive the highest possible return with the least amount of cash possible.
Wouldn’t it be nice if I could apply the OPM idea to pay your credit cards?
Well, it can.
No one likes to increase credit card debt. Once you get into debt, going back can be difficult, if not impossible. However, there are alternatives to bankruptcy damage that smart consumers can use to get out of credit card debt and continue avoiding it. Best of all, many of these options allow you, in part, to use other people’s money.
Using a credit card with balance transfer is one of the best ways to use OPM to pay off your credit card debt. Simply put, you apply for a credit card with two characteristics: a spending limit large enough to pay off the rest of your current debt and an introductory annual percentage rate (APR) period of 0% .
Using that card, you pay all your other debts at once. Then, start paying the total balance of that card with the same payment you were making in the original debt each month. As there is a 0% APR, you will pay more debt and less compound interest, basically using the money from the credit card company to pay off your debt.
The key is to find an introductory APR period of 0% that is long enough to allow you to pay all your debts before the end of the period and thus maximize the amount of debt against interest payments.
Line of credit with real estate guarantee
If you own a home, there is a way to use whatever capital you have to pay off your credit card debt. A line of credit with real estate collateral (HELOC) has a historically lower interest rate than credit cards: an average of 4.5% compared to 16.5%, respectively. By getting a HELOC and using the capital to pay your credit cards, you can pay your debt up to four times faster, using the bank’s money instead of yours.
It is also important to keep in mind that the huge difference in the interest rate that you can get through a HELOC (and the next option we will discuss) allows you to make a lower monthly payment and pay your debt faster, even if you cannot make the full monthly payment of your debt, which is why you are looking to reduce the payment.
Debt consolidation loan
With a debt consolidation loan, a company like Credit Direct uses its own money to pay off all of your debts, which allows you to make a monthly payment, usually at a lower general interest rate. This is one of OPM’s best options because it allows you to pay all your debts at the same time without additional risk to your own capital.
In addition, a debt consolidation loan does not carry a potential risk for your credit score. Although the interest rate may be based on your current score, it has been shown that a debt consolidation loan is more likely to help improve your score by eliminating the amount of accounts opened in your report.
Monetize your hobby
Time is often a more limited product than money. Therefore, getting a second job is probably not an option to help you pay off your debts; If you don’t have two or even three jobs. But what about his hobby? Is the activity you enjoy in your spare time something that can make you earn extra dollars?
The last twenty years have given rise to “the informal economy,” where websites such as Upwork and Fivver allow people to work autonomously in their free time. Websites such as eBay and Etsy have given artisans and artists a market. This can be a fun way to contribute some extra money from other people that you can use to pay off your debts.
Debt settlement is one of the most significant ways to use other people’s money to pay their credit card debts, but it should be considered as the last resort. Debt settlement is the negotiation process with creditors to reduce total debts in exchange for payment of the total amount. A successful settlement occurs when the creditor agrees to forgive a percentage of the total account balance.
A debt settlement can reduce your total debt by half, but it can hurt your credit score in the short term. It is always better to find a way to pay off your debts, but it is important to find the OPM method that works best for you, your family and your future.