Credit Card Debt Consolidation

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It’s not uncommon for people to take on debt from multiple sources. When you are carrying balances on multiple credit cards, it can be difficult to manage your payments. Not to mention incredibly high interest rates.

To get around this, people organize their balances by transfering it to credit cards or consolidation loans (the practice of combining multiple balances into a single obligation.)

This makes it easy to manage your payments, as you now only have one monthly payment, and can also help lower your interest rates and change your term.

Who Should Consolidate Their Credit Card Debt?

This is a great option for pretty much anyone with multiple high-interest balances.

Consolidating your balances into one, low-interest payment can help you save a lot of money on interest over time.

Ways to Consolidate

There are several different options to choose from if you want to organize your balances:

These options include:

1. Balance Transfer Cards: Balance transfer cards allow you to transfer your balances onto a single card with a lower interest rate. These often have extended periods with 0% interest, making it easier to pay down the principal balance.

2. Debt Consolidation Loans: If you qualify for a low interest rate, loans are a great way to combine your payments into one place with a low monthly payment.

3. Home Equity Line of Credit (HELOC): Homeowners can use HELOCs to borrow some of their home’s equity at a low rate, which can be used to pay off your outstanding balances.

While there may be a few other options, these are typically going to be your main choices.

Benefits

Consider these benefits before making a decision:

  • Lower interest rates
  • Renegotiate your repayment term
  • Lower your monthly payment
  • Turn multiple payments into a single monthly payment
  • Pay off faster

It should be noted, though, that the benefits can generally only be achieved if you have a good credit score and steady income. Otherwise, you may not be able to qualify for a loan with favorable terms and interest rates.

How Much Does it Cost?

The total cost is dependent on the total outstanding  balance, your interest rate, repayment term, and fees.

Each of these factors varies from lender to lender, so it’s important to compare your options and review your lender’s terms before taking out a loan.

If you don’t have a large outstanding balance, balance transfer cards can allow you to pay off your balance during the 0% interest introductory period in order to avoid accruing additional interest.

Once you have your balance, interest rate, and term, you can use a loan calculator to determine your monthly payments and the total cost of your loan.

Tips for Applying for a Debt Consolidation Loan

Ready to to get started?

Keep these tips in mind to ensure you find the best option available.

- Know Your Options

As mentioned, there are several ways to organize your balances, including balance transfer cards, HELOCs, and personal loans. Be sure to look into the pros and cons of each option to see which one makes the most sense for you.

Once you pick a method, take your time to compare offers from multiple lenders. This will ensure you’re able to find the best rates and terms available.

- Be Prepared

Before starting your application, take a minute to gather the following documents:

  • Personal ID
  • Social Security Number
  • Bank Statements, Pay Stubs, Tax Returns
  • Proof of Employment
  • Debt Information
  • Employment History

Check with your lender to see what other documents you may need to complete your application.

- Apply

All that’s left is to apply!

If you are approved, you’ll have another chance to review your loan terms before accepting the offer.

Make sure to carefully review your interest rate, repayment information, fees, and other information. If everything checks out, you can accept the offer and start tackling your debt.

Typical cost is

$463/Month

Monthly payment on 2 year loan with no origination fees, 10.31% interest, good credit, and $10,000 balance, assuming unsecured