Table of Contents

    Why Consolidate Your Credit Card Debt?

    Credit Card Consolidation

    Do you have multiple payments you have to settle each month? Maybe you get confused about the amount you need to cover and on which day? Or what the interest rate is for each liability you have under your name

    You might want to look into consolidating your debt into one monthly payment and interest rate.

    What Is a Credit Card Consolidation Loan?

    A credit card debt consolidation loan is used to pay off multiple card balances. Then you will only have to make one payment a month at a set interest rate.

    Usually, loans to pay off credit card debt help you manage your obligations and make it less confusing. In some cases, it can also save money in the long run.

    Our Top Picks for 2020

    • No-fee Personal Loans
    • Loan invitation codes
    • No Co-signers needed
    • No prepayment penalty
    • Late payment fee is $15 or 5% of payment after 15-grace period
    • Credit score is not effected when checking your rate
    • Fast application
    • No Prepayment fees
    • Monthly payments you can afford
    • Very fast funding
    • 1.5%-6% Origination fee
    • $10 late payment fee after 15 days past due date
    • Cashback checking
    • Building credit history
    • No Origination fee
    • Financial planning
    • Low interest rates
    • Career coaching
    • No prepayment fee
    • No common fees
    • Origination fees between 2% and 5%
    • Check your rate with an invite code

    5 Reasons Why You Should Consolidate Your Credit Card Debt?

    There are many reasons why it’s a good idea to consolidate your debt. The main goal is to get a hold on it and be able to manage it better. With this type of loan, you know how much you will pay each month, and there is an end date in sight.

    Make sure you shop around as some factors can help you save money on interest. 

    Here are several reasons why you should get a consolidation loan for your credit card Debt:

    • Improve your credit
    • Get a fixed rate
    • Save money on interest
    • No fees
    • Know when your dept will end

    By consolidating your credit card debt, you can improve your credit score. It lowers your credit utilization, which is a large part of your overall rating. If you pay the correct amount, on time,  every month, your credit score will go up as well. These two things combined are responsible for 65% of your overall credit score. 

    All credit cards have various annual percentage rates (APR) which can add up to a lot of extra money you have to pay in the end. Usually, when you take out a debt consolidation loan, the rate is based on your credit score, and this will help you to save money. When you consistently pay each month and improve your credit score, you can refinance your loan with a lower APR. 

    Depending on which lending company you use for your loan, there are no additional fees after the interest rates. This is perfect if the cards you hold now have annual fees. You could also search for a non-variable interest rate. If you want a better score and improved credit, get a fixed rate.

    Overall, the benefits of consolidating your debt are positive. Just make sure that the amount you have to pay each month is within your means because loans like this have late fees, and that will negatively affect your credit score. 

    Best Ways to Consolidate Your Credit Card Debt on Your Own

    If you are looking to consolidate your debt, there are many options to do so. The most critical thing to think about is the APR for the best credit card consolidation loans, and this is firmly based on your credit score. 

    Some of the best credit card consolidation loans have an interest rate as low as 5.5%.

    However, these types of loans require a good credit score. Usually, the minimum credit score is 650 to apply for these, but the better the number, the lower the interest rate. 

    Budgeting and Counselling for Those With Bad Credit

    If you are worried because your score isn’t so good, there are options.

    However, the annual percentage rate could be upward of 35%, which can lead to more debt if you are unable to pay on time.

    You should take the time to understand and be realistic about your current budget as you need to make sure you are not making the situation worse.

    Another option could be bad credit counseling. There are many non-profit organizations out there set up to help you with the stress and practicalities of being in debt. 

    Get a Personal Loan or Balance Transfer

    One option to use for credit card consolidation loans is by taking out a personal loan. It is a reliable option because they are straightforward to get, and you can receive your money quickly.

    This type of investment has minimum risk and also has a variety of interest rates. The rates are based upon your credit score. You can usually take out anywhere from $1,000 - $25,000 with a personal loan.

    Some companies offer balance transfers from existing credit cards to their lower interest or zero interest offerings. This can be an excellent way to reduce interest payments and enjoy the benefit of making one payment each month.

    Read the terms and conditions carefully and check with your current credit card provider before doing so. More on that coming later. 

    Secured Loans vs. Unsecured Loans

    Personal loans come as either secured loans or unsecured loans. A secured loan is when you put something of value like a car or a house with the loan, so if you do not make payments, the lender can take that from you.

    A secured loan has a lower interest rate, but higher risk.  

    An unsecured loan is when you do not have to put anything up for the funds you receive. Loan companies instead use your credit score to determine the interest rate. It is usually higher if you have a bad credit score, but is a lower risk because you won’t have your car or home at the possibility of being taken away. 

    Home Equity Loans

    There are home equity loans as well, but these come with a higher risk because you are putting your home on the line. 

    These types of loans usually have a lower interest rate because you are putting your house as a guarantee.

    Read More: How to Pay Off Debt with Home Equity Loan 

    Retirement Account Loan

    You can loan from your 401(K), but this is risky as well. With this type of loan, you are borrowing from your retirement. If you don’t pay it back, though, once it’s time to retire, you can face even more financial problems.

    You don’t want to be of retirement age but unable to stop working because you don’t have any money saved. Also, you don’t want to put that financial burden on your children if you are unable to work or support yourself. 

    Debt Settlement

    Debt settlement is another option, but it’s not the best. You and the lender can agree to pay less than the full amount.

    This might sound like a good idea at first; however, there are many downsides.

    It destroys your credit score, and settling can take a long time. There are penalty fees and other fees that can add up too. 

    Ask Family Members for Help

    Another route is borrowing from a family member or friend. Depending on what you agree with them, you can usually borrow money without interest. You must be responsible for paying them back because they are doing you a massive favor. 

    These are just some options you can think about when you consolidate your debt that we feel are suitable for all types of needs and scores.