An image of credit cards pointing to a personal loan

3 Ways to Consolidate Credit Card Debt

Milad Hassibi June 9, 2018

If you are in a significant amount of debt, you may feel as if though you are carrying a heavy burden on your shoulders with no clear way out.

Regardless of the reason as to why you are in debt, there are steps that can be taken to ensure that the repayment of your debt happens as quickly as possible.

One common method of dealing with a large amount of debt quickly is debt consolidation.

What is Debt Consolidation?

But what is debt consolidation? What are some ways to consolidate credit card debt?

Debt consolidation is when you take out one single low interest “loan” to pay off all outstanding debts.

Once the debts have been paid in full using the consolidation loan, you simply repay the debt consolidation loan back. This is usually done with fixed payments over a set period of time.

There are different ways of consolidating your debts, and some may have an effect on your credit score, depending on how you manage your payments.

Therefore, it’s important to ensure that you’re not only considering your current circumstances, but also any future endeavors that may require a healthy credit score.

If you are expecting your accounts to go into collections, consolidating your credit card debt may be your best choice.

Best Ways to Consolidate Credit Card Debt

1. Complete a Balance Transfer to Consolidate Credit Card Debt

A balance transfer is a great way to consolidate credit card debt. If you have paid off a large amount of your debt already, you might want to think about placing all your debts onto a single credit card and only make only one monthly payment thereafter.

Not only can a balance transfer save you a vast amount of money on interest, but it makes tracking and managing your payments much easier. Most major credit card companies offer balance transfers. Many of these offers even have 0% APR available for the first year.

It also aids those who are focused on clearing their balance as soon as possible, and because of the 0% APR, the whole monthly payment is being used to reduce the debt directly, not pay interest.

You will want to repay all your debt before the 0% APR offer expires, or else you could be slapped with high-interest rates. If you want to learn more about balance transfers, check out our balance transfer article.

Balance Transfer Limitations for Debt Consolidation

It should be noted that there are some limitations on balance transfers, depending on your circumstances and current credit card provider.

For example, it isn’t possible to transfer balances between cards from the same operator. You cannot complete a balance transfer from one Chase credit card to another Chase credit card. The balance must be transferred to another institution such as Citi Bank or Bank of America.

If you have less than perfect credit, you may have a hard time getting approved for a 0% balance transfer.

However, even if you are charged an APR percentage right from the start, you could still save big on interest. Just make sure that the interest rate is on the balance transfer lower than the one offered on your current debts.

Balance Transfer Fees for Debt Consolidation

Some lenders may charge a fee to initiate a balance transfer. How this fee is charged can depend on the lender you’re applying with. Some may offer a flat fee, whereas others may charge a percentage of the balance being moved.

The percentages charged for a balance transfer normally range from 3% to 5%. Although this fee seems low, it’s a different story if we are talking about transferring $100,000 worth of credit card debt.

It is therefore imperative that when making an application for a balance transfer you assess any fees, plus any interest you may be charged.

2. Personal Loans to Consolidate Credit Card Debt

Consolidating credit card debt with a personal loan is very similar to a balance transfer for debt consolidation. You will use the funds from the personal loan to pay off all your debts, and just repay the personal loan after.

Again, the goal is to find a personal loan with an interest rate lower than your current debt accounts.

As well as working how much will be needed to pay off your existing debts, you will also need to ensure that the APR is more cost-effective than what you’re currently paying, otherwise, you could find that little changes in relation to the monthly payments.

For example, it wouldn’t make sense to get a personal loan at a 7% interest rate if you are currently paying 5%.

Another consideration that needs to be made is that the APR charged can depend on your credit score. Those who have bad credit may find that the loans they qualify for have a higher APR than they’re used to.

If you find that you are falling behind on debt payments, then a personal loan could be the answer you’re looking for. It’s also important to approach the right professional so you can be sure that you’re being given the right product for your circumstances.

You also must factor in what type of personal loan you plan to apply for: secured or unsecured. Both have their pros and cons.

  • Secured loans will require you to put up collateral, such as a vehicle or property, but it does give you more leverage when applying for a loan that offers good interest rates. Note failure to meet the repayments could mean that your assets are at risk of being sold off at auction.
  • Unsecured personal loans entail there are no assets being used as collateral. With an unsecured loan, a creditor cannot come and seize your assets, but they can report any missed payments to the credit bureaus.

As well as deciding what type of loan you need, you will also need to ensure that you’re applying for a loan that meets your needs.

For example, if you have missed multiple payments in the past, then you may find that you’re not always able to qualify for personal loans with the lowest rates, whereas those with more adverse credit could struggle to find a loan at all.

You can find personal loans through various online sources, including CrediReady. Although banks and financial institutions do offer personal loans for debt consolidation, it can be hard to acquire one if you already have a bad credit score.

3. Get a Debt Management Plan

A debt management plan is created by a for-profit service that will help people in who are in extensive debt struggling to make minimum payments.

A debt management company will negotiate with your lenders and creditors to help stop your accounts from moving into collections while you repay your balances.

Pros of a debt management plan

The pros associated with a debt management plan for consolidating credit card debt include potentially reducing the interest you pay on your current commitments, as well as ensuring that any debt is repaid in full at the end of the plan.

In most instances, interest rates charged by your lenders will be negotiated, which will help determine an overall figure that needs to be repaid at the end of the repayment period.

The smaller payments partnered with a final figure means that there is less stress when making repayments, due to only one monthly payment being needed.

Cons of a debt management plan

Despite the pros, there are also some cons that will mean that a debt management plan isn’t for all debt consolidation situations. This includes the possibility of not having access to any further credit during the debt management plan duration. There is also a chance that some creditors may not agree to the terms of the plan.

Although a debt management plan can help reduce some costs, you may find that you have to stay committed to the plan for several years, depending on how much money you owe.

There’s More Than One Approach

Due to the many variables that go into a person’s debts, not every option may be right for you. It’s important that you consider all options carefully and obtain expert advice when possible.

Before you start exploring your debt consolidation options, be sure to get your free credit report from the government mandated website Having access to your credit report and score can ensure you are getting a fair interest rate with your credit history.

The Annual Credit Report website is mandated by Federal Law to allow you access to a free copy of your credit report, once per year, from each of the 3 major credit bureaus. This means you can view a credit report for each individual credit bureau every 4 months for free.

When checking your free credit report, be sure to check that all the debts and their corresponding amounts are accurate. If they aren’t, file a dispute with the credit bureau that generated the report. The three main credit bureaus can be contacted via the following means:

Equifax: 1-866-349-5191
Experian: 1-888-397-3742
TransUnion: 1-800-916-8800

In some instances, you may need to contact all the credit references agencies to make the changes. It will depend on which credit bureaus have been used, so gaining access to reports from all three providers is the ideal way to keep track of your current score, as well as any inconsistencies that may arise.

Checking your credit report for any errors or discrepancies can help increase your credit score, which can boost your chances of approval for a balance transfer or personal loan.

Final Note

If you are looking to get a personal loan, CrediReady can help. Our nationwide network of trusted and verified lenders work with borrowers in all credit situations. Take a moment to fill out our free no-obligation loan inquiry form and get the money you need today!

Free Credit Score

Get your free credit score now! Get a copy of your most recent credit score.
get your free score

Auto Insurance

Get your free insurance quote now! Save big on auto insurance today!
get your free quote

Vehicle Warranty

Protect your vehicle and you could save thousands on auto repairs.
get your free quote