Credit Card Debt Consolidation Guide

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

To get around this, people consolidate credit card debt via debt consolidation loans or balance transfer credit cards. Debt consolidation is the practice of combining multiple debts into a single loan.

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?

Debt consolidation is a great option for pretty much anyone with multiple high-interest debts.

Consolidating your credit card debt into one, low-interest debt consolidation loan can help you save a lot of money on interest over time.

Ways to Consolidate Credit Card Debt

There are several different options to choose from if you want to consolidate credit card debt.

These options include:

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

2. Debt Consolidation Loans: If you qualify for a low interest rate, loans are a great way to consolidate your credit card debt into one loan 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 consolidate your credit card debt. 

While there may be a few other options, these are typically going to be your main choices for consolidating credit card debt.

Benefits of Debt Consolidation

Should you consolidate your credit card debt? 

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 debt faster

It should be noted, though, that the benefits of debt consolidation 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 to Consolidate Credit Card Debt?

The total cost to consolidate your credit card debt is dependent on the total balance of your debt, 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 lot of credit card debt, balance transfer cards can allow you to pay off your debt 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 consolidate your credit card debt?

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

- Know Your Options

As mentioned, there are several ways to consolidate credit card debt, 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